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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1997
REGISTRATION NO. 33-68712
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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BURNHAM PACIFIC PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 33-0204162
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
610 WEST ASH STREET
SUITE 1600
SAN DIEGO, CALIFORNIA 92101
(619) 652-4700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
DANIEL B. PLATT
610 WEST ASH STREET
SUITE 1600
SAN DIEGO, CALIFORNIA 92101
(619) 652-4700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
AND TELEPHONE, INCLUDING AREA CODE OF
AGENT FOR SERVICE)
COPY TO:
WILLIAM B. KING, P.C.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MA 02109
(617) 570-1000
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PROSPECTUS
BURNHAM PACIFIC PROPERTIES, INC.
SHARES OF COMMON STOCK
AND/OR
CONVERTIBLE DEBENTURES
------------------------
Any combination of shares of common stock, without par value (the "Common
Stock"), and/or Convertible Debentures, issuable in series (the "Debentures"),
with a maximum aggregate offering price of $200,000,000, are being offered from
time to time (the "Offering(s)") by Burnham Pacific Properties, Inc., a
California corporation (the "Company"). The Company has elected to qualify as a
real estate investment trust for federal income tax purposes. The Common Stock
and Debentures are hereinafter collectively referred to as the "Securities."
When a particular Offering of the Securities is proposed, a supplement to this
Prospectus (the "Prospectus Supplement") will be delivered with this Prospectus
setting forth: the type and amount of Securities offered; the purchase price and
other terms of the offering; and any listing on a securities exchange; and, if
Debentures are offered, the rate and time of payment of interest, the maturity
or maturities, the initial price and date after which such Debentures may be
converted into Common Stock, the terms for a sinking, purchase or analogous
fund, if any, and the terms for redemption or early payment, if any.
The Securities may be sold: (i) through underwriting syndicates represented
by one or more managing underwriters, or by one or more underwriters without a
syndicate; (ii) through agents designated from time to time; and (iii) directly
to institutional investors. The names of any underwriters or agents of the
Company involved in the sale of the Securities in which this Prospectus is being
delivered and any applicable commissions or discounts will be set forth in the
Prospectus Supplement. The net proceeds to the Company from such sale will also
be set forth in the Prospectus Supplement.
The Company's shares of Common Stock are traded on the New York Stock
Exchange under the symbol "BPP." A recent closing sale price of such shares on
the New York Stock Exchange prior to the commencement of an Offering will be set
forth on the cover page of the Prospectus Supplement.
The Debentures will be unsecured general obligations of the Company
issuable in one or more series and will be subordinated to all existing and
future Senior Indebtedness (as defined herein) of the Company. The indenture
under which the Debentures will be issued does not restrict the amount of Senior
Indebtedness or other indebtedness that may be incurred by the Company. As of
December 31, 1996, the Company had approximately $178,000,000 of Senior
Indebtedness.
There is currently no market for the Debentures.
------------------------
SEE "RISK FACTORS" ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES.
------------------------
No offers or sales will be made except through a Prospectus Supplement.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is March 25, 1997.
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AVAILABLE INFORMATION
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus or
any accompanying Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. Neither the delivery of this
Prospectus or any accompanying Prospectus Supplement nor any sale made hereunder
or thereunder shall, under any circumstances, create an implication that the
information contained herein or in the accompanying Prospectus Supplement is
correct as of any date subsequent to the date hereof or thereof or that there
has been no change in the affairs of the Company since the date hereof or
thereof. Neither this Prospectus nor any accompanying Prospectus Supplement
constitutes an offer to sell or a solicitation of an offer to buy Securities in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files periodic and current reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports, proxy statements and other information can also be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at 500 West Madison Street (Suite
1400), Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005. The Commission also maintains a Web site
that contains reports, proxy statements and other information about the Company
filed electronically with the Commission: http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained upon payment of a fee prescribed by the Commission, or may
be examined free of charge at the principal office of the Commission in
Washington, D.C.
Statements made in this Prospectus or in the accompanying Prospectus
Supplement as to the contents of any contract or other document referred to do
not purport to be complete, and reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference its Annual Report on Form 10-K
for the year ended December 31, 1996 and the Company's Current Report on Form
8-K dated January 31, 1997.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior
to the termination of the Offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein (or in an applicable Prospectus Supplement) or in
any subsequently filed document that is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to constitute a part of
this Prospectus or any Prospectus Supplement, except as so modified or
superseded.
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The Company will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, at the request
of such person, a copy of any or all of the documents incorporated herein by
reference (other than exhibits thereto, unless such exhibits are specifically
incorporated by reference into such documents). Written requests for such copies
should be directed to Daniel B. Platt, Chief Financial Officer, Burnham Pacific
Properties, Inc., 610 West Ash Street, Suite 1600, San Diego, California 92101,
telephone (619) 652-4700.
THE COMPANY
The Company is a fully-integrated, self-managed real estate operating
company which acquires, rehabilitates, develops and manages retail properties on
the West Coast. The Company was incorporated in 1986 as the successor to a
publicly-traded real estate limited partnership which was organized in 1963. The
Company has elected to qualify as a real estate investment trust ("REIT") for
federal income tax purposes.
The Company is organized under the laws of the State of California. Its
principal executive office is located at 610 West Ash Street, Suite 1600, San
Diego, California, 92101, telephone (619) 652-4700.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges................... 1.09 1.94 2.13 -- 1.67
Deficiency in the coverage of fixed charges by
earnings before fixed charges...................... -- -- -- $15,048 --
</TABLE>
The ratio of earnings to fixed charges equals earnings before fixed charges
divided by fixed charges. For purposes of calculating the ratio of earnings to
fixed charges, earnings before fixed charges consist of income from operations
plus fixed charges (other than capitalized interest). Fixed charges consist of
interest expense and capitalized interest.
Exclusive of the impairments/writedowns of assets, the ratio of earnings to
fixed charges for the year ended December 31, 1995, would have been 1.61.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities primarily to
repay indebtedness, to acquire additional retail shopping centers or other
retail or entertainment facilities and to fund the development, expansion and/or
improvement of new or existing retail shopping centers or other retail or
entertainment centers already owned by the Company. The net proceeds from the
sale of Securities may also be used for other general corporate purposes.
Pending their use as described above, net proceeds from the sale of Securities
may be invested in short term investments.
RISK FACTORS
In addition to the other information set forth and incorporated by
reference herein, prospective investors should carefully consider the following
information in evaluating the Company and its business before making an
investment in the Securities offered hereby. The information contained and
incorporated by reference in this Prospectus and the applicable Prospectus
Supplement contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the 1934 Act that involve a number of risks and uncertainties. A number of
factors could cause results to differ materially from those anticipated by such
forward-looking statements. These factors include, but are not limited to, the
competitive environment in the retail industry in general and in the Company's
specific market areas, changes in prevailing interest rates and the availability
of financing, inflation, economic conditions in
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general and in the Company's specific market areas, labor disturbances, demands
placed on management by the recent substantial increase in the number of
properties owned by the Company (the "Properties"), and changes in the Company's
acquisition plans and certain other factors described below. In addition, such
forward-looking statements are necessarily dependent upon assumptions, estimates
and data that may be incorrect or imprecise. Accordingly, any forward-looking
statements included or incorporated by reference in this Prospectus and the
applicable Prospectus Supplement do not purport to be predictions of future
events or circumstances and may not be realized. Forward-looking statements can
be identified by, among other things, the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," "seeks," "pro forma," or
"anticipates," or the negative thereof, or other variations thereon or
comparable terminology, or by discussions of strategy or intentions.
DISTRIBUTIONS TO SHAREHOLDERS
As a California corporation, the Company is subject to the California
General Corporation Law (the "CGCL"). Under the CGCL, a corporation may only
make a distribution to shareholders if (i) its retained earnings immediately
prior to payment of the distribution are at least equal to the amount of the
distribution, or (ii) generally, its total assets (determined on the basis of
their depreciated historical cost in accordance with generally accepted
accounting principles ("GAAP") and exclusive of certain intangible assets and
certain other charges and expenses) are equal to at least 1 1/4 times its total
liabilities (excluding certain deferred items) immediately after giving effect
to the distribution. The CGCL also prohibits a California corporation from
making any distribution to shareholders if the corporation is or, as a result
thereof, would be likely to be unable to meet its liabilities as they mature.
The CGCL also imposes certain further limitations on distributions on common
stock if capital stock with a preference on distributions of assets upon
liquidation or payment of dividends is outstanding.
The Company has historically paid quarterly cash dividends since its
incorporation in 1986. Like most REITs whose assets consist of real property,
the Company's distributions have reflected the amount of cash available for
distribution from Property operations or from "Funds From Operations" rather
than from "retained earnings." "Funds From Operations," as currently defined by
the National Association of Real Estate Investment Trusts, represents net income
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization of real
estate assets, and after adjustments for unconsolidated partnerships and joint
ventures. Non-cash charges for depreciation reduce net income and consequently
retained earnings, but not Funds From Operations or cash available for
distribution.
The Company's quarterly distributions over the past 10 years have exceeded
its GAAP net income over the period and resulted in negative "retained earnings"
on the Company's balance sheet, with the result that the Company's legal ability
under the CGCL to make distributions depends upon the book value of its assets
exceeding 1 1/4 times its liabilities. Such "book value" is also determined in
accordance with GAAP, which means that such book value cannot exceed the
historic acquisition cost of the Company's Properties less charges for
depreciation and certain deductions related to writedowns for impairment. As a
result, the book value of Properties will typically decline over time and, in
any event, does not purport to reflect the actual fair market value of the
assets at the time that distributions to shareholders are made. Accordingly,
there can be no assurance that the Company will continue to be able to satisfy
the CGCL requirements with respect to the payment of distributions to
shareholders. A failure to satisfy these provisions would require a reduction in
or cessation of distributions to shareholders, which could prevent the Company
from satisfying the distribution requirements under the Internal Revenue Code of
1986, as amended (the "Code") necessary to maintain its REIT status, either of
which would likely have a material adverse effect on the Company and on its
ability to make distributions to shareholders. See "Federal Income Tax
Considerations" for a discussion of the Company's requirement to make
distributions under the Code. Consequently, the Board of Directors of the
Company is proposing to reincorporate the Company in Maryland. See "-- Proposed
Reincorporation" and "Description of Common Stock -- Proposed Reincorporation of
the Company".
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GENERAL REAL ESTATE INVESTMENT RISKS
Real property investments are subject to a variety of risks. The yields
available from equity investments in real estate depend on the amount of income
generated and expenses incurred. If the Properties do not generate sufficient
income to meet operating expenses, including debt service and capital
expenditures, the Company's results of operations and ability to make
distributions to its shareholders will be adversely affected. The performance of
the economy in each of the areas in which the Company's Properties are located
affects occupancy, market rental and vacancy rates and expenses, and,
consequently, has an impact on the revenues from the Properties and their
underlying values. The financial results of major local employers may have an
impact on the revenues and value of certain of the Properties.
Revenues from the Company's Properties may be further adversely affected
by, among other things, the general economic climate, local economic conditions
in which the Properties are located, such as oversupply of space or a reduction
in demand for rental space, the attractiveness of the Properties to tenants,
competition from other available space, the ability of the Company to provide
for adequate maintenance and insurance and increased operating expenses
(including real estate taxes and utilities) which may not be passed through to
tenants; and the expense of periodically renovating, repairing and re-leasing
space. There is also the risk that as leases on the Properties expire, tenants
will enter into new leases on terms that are less favorable to the Company.
Revenues and real estate values may also be adversely affected by such factors
as applicable laws (e.g., the Americans With Disabilities Act of 1990 and tax
laws), interest rate levels and the availability and terms of financing. In
addition, real estate investments are relatively illiquid and, therefore, will
tend to limit the ability of the Company to vary its portfolio promptly in
response to changes in economic or other conditions.
Most of the leases of the Company's retail Properties, as is common with
many multi-tenant shopping centers, provide for tenants to reimburse the Company
for a portion (frequently based upon the portion of total retail space in the
Property that is occupied by the tenant) of the common area maintenance, real
estate taxes, insurance and other operating expenses of the Property. To the
extent that a Property has vacant rentable space, not only will the Company be
deprived of the base rent that it would receive if the vacant space were
occupied, but the Company itself will have to bear the unreimbursed expense
applicable to such vacant space. Likewise, such expenses are generally not
reduced when circumstances cause a reduction in rental revenues from the
Property. If a Property is mortgaged to secure the payment of indebtedness and
if the Company is unable to meet its mortgage payments, a loss could be
sustained as a result of foreclosure on the Property or the exercise of other
remedies by the mortgagee. Likewise, if a Property suffers sustained reductions
in revenues, the Company may sustain a writedown of the asset value and a
related charge to earnings.
INVESTMENT IN SINGLE INDUSTRY
The Company's current strategy is to acquire interests only in retail
shopping centers and related properties. As a result, the Company will be
subject to risks inherent in investments in a single industry. The effects on
cash available for distribution to the Company's shareholders resulting from a
downturn in the retail industry might be more pronounced than if the Company's
portfolio were more diversified as to property types.
Among the risks that the Company as an owner of Properties leased primarily
to retail tenants may face are the volatile nature of the retail business and
changes in consumer preferences, which may result in tenant failures or changes
in the physical requirements of retailers that the Company may be required to
accommodate in order to retain or attract tenants. Retail chains may overexpand
in the same general market area, thereby creating competition with their own
stores that may be in one or more of the Company's Properties. Because many
anchor tenants frequently have negotiating power to demand the exclusive or sole
right to sell certain types of products in a shopping center, the existence of
such rights may adversely limit the Company's ability to lease space in the
center to retailers of potentially competing products. The foregoing and similar
factors may affect the revenues, and resulting value, of the Company's
Properties.
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BANKRUPTCY AND FINANCIAL CONDITION OF TENANTS
At any time, a tenant of the Properties may seek the protection of the
bankruptcy laws, which could result in the rejection and termination of such
tenant's lease and thereby adversely affect the Company's results of operations
and ability to make distributions to its shareholders. Although the Company has
not experienced material losses from tenant bankruptcies, no assurance can be
given that tenants will not file for bankruptcy protection in the future, or if
any tenants file, that they will affirm their leases and continue to make rental
payments in a timely manner. In addition, a tenant from time to time may
experience a downturn in its business which may weaken its financial condition
and result in the failure to make rental payments when due. If tenant leases are
not affirmed following bankruptcy or if a tenant's financial condition weakens,
the Company's results of operations and ability to make distributions to its
shareholders may be adversely affected.
GEOGRAPHIC CONCENTRATION
The Company's Properties are all located within the State of California,
and within such state primarily in the San Diego County, greater Los Angeles and
San Francisco Bay areas. This concentration of Properties subjects the Company
to the strengths or weaknesses of the California economy and the aforementioned
local economies in a number of ways. The performance of the economy in each
locality affects occupancy, market rental rates and expenses and, consequently,
has an impact on the revenues from the Company's Properties and their underlying
values. The financial results of major local employers may have an impact on the
revenues and value of certain of the Properties. A downturn in the economy of
California in general or of any of these local economies could adversely affect
the Company's results of operations and ability to make distributions to its
shareholders. In that regard, certain areas of California (particularly the
greater Los Angeles area) have in the past been adversely affected by reductions
in defense spending, and certain other areas of California (particularly the San
Francisco Bay area) may be substantially influenced by conditions in the high
technology industries. Additionally, certain areas in California have been and
remain subject to various natural disasters, including earthquakes and floods.
See "-- Insurance Coverage Limitations."
COMPETITION
Numerous retail properties compete with the Company's Properties in
attracting tenants to lease space. Some of these competing properties are newer
and better located or designed and may offer lower expenses or be better
capitalized than the Company's Properties. The number of competitive commercial
properties in a particular area could have a material adverse effect on the
Company's ability to lease space in its Properties or at newly developed or
acquired properties and on the rents charged.
Additionally, the Company may be competing for investment opportunities
with entities which have substantially greater financial resources than the
Company. These entities may generally be able to accept more risk than the
Company can prudently manage. Competition may generally reduce the number of
suitable investment opportunities offered to the Company and increase the
bargaining power of property owners seeking to sell.
ACQUISITION AND DEVELOPMENT ACTIVITIES
The Company intends to acquire existing retail commercial properties to the
extent that they can be acquired on acceptable terms and meet the Company's
investment criteria, including the availability of suitable financing.
Acquisitions of retail commercial properties entail general investment risks
associated with any real estate investment, including the risk that investments
will fail to perform as expected or that estimates of the cost of improvements
to bring an acquired property up to standards established for the intended
market position may prove inaccurate.
The Company is pursuing certain commercial property development projects
and expects to develop other projects. As a general matter, property development
projects typically carry a higher, and sometimes substantially higher, level of
risk than the acquisition of existing properties. For example, development
projects generally require various governmental and other approvals, the receipt
of which cannot be assured. Approvals
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frequently require undertakings for public infrastructure improvements or other
activities to mitigate the effects of the proposed development, whose costs also
cannot be assured. The Company's development activities will entail a variety of
other risks, including the risk that funds will be expended and management time
will be devoted to projects which may not come to fruition; the risk that a
project will not be developed by the scheduled completion date; the risk that
construction costs of a project may exceed original estimates, possibly making
the project economically unfavorable to operate or requiring a writedown of the
carrying amount of the project; the risk that occupancy rates and rents at a
completed project will be less than anticipated; and the risk that expenses at a
completed development will be higher than anticipated. These risks may adversely
affect the Company's results of operations and ability to make distributions to
its shareholders.
The integration of the aforementioned acquisition and development
properties into the systems and procedures of the Company presents a management
challenge, and the failure to integrate such properties into the Company's
operating structures could have a material adverse effect on the Company's
results of operations and ability to make distributions to its shareholders.
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company has elected to qualify as a REIT under the Code. Although the
Company believes that it has operated in a manner which satisfies the REIT
qualification requirements since 1987, no assurance can be given that the
Company's qualification as a REIT will not be challenged by the Internal Revenue
Service for taxable years still subject to audit or that the Company will
continue to qualify as a REIT in future years. A REIT generally is not taxed on
distributed income so long as it distributes to its shareholders at least 95% of
its real estate investment trust taxable income. Qualification as a REIT
involves the satisfaction of numerous requirements (some on an annual or
quarterly basis) established under highly technical and complex Code provisions
for which there are only limited judicial or administrative interpretations and
involves the determination of various factual matters and circumstances not
entirely within the Company's control. If in any taxable year the Company were
to fail to qualify as a REIT, the Company would not be allowed a deduction for
distributions to shareholders in computing taxable income and would be subject
to federal income tax on its taxable income at regular corporate rates. Unless
entitled to relief under certain statutory provisions, the Company would also be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. As a result, the funds available for
distribution to the Company's shareholders would be reduced for each of the
years involved. Although the Company currently intends to operate in a manner
designed to qualify as a REIT, it is possible that future economic, market,
legal, tax or other considerations may cause the Company to fail to qualify as a
REIT or may cause the Company's Board of Directors to revoke the REIT election.
See "Federal Income Tax Considerations."
PROPOSED REINCORPORATION
The Board of Directors of the Company has unanimously approved a proposal
to change the Company's state of incorporation from California to Maryland (the
"Reincorporation"). The primary purpose of the proposed change in domicile is to
avoid the applicability of the aforementioned provisions under the CGCL which
restrict the Company's ability to make distributions to its shareholders and
could potentially prevent the Company from making distributions in an amount
necessary to qualify as a REIT under the Code. See "-- Distributions to
Shareholders." The proposed Reincorporation is subject to approval by
shareholders at the 1997 Annual Meeting, the Proxy Statement for which will
describe the reasons for and certain consequences of the proposed
Reincorporation including certain differences between California and Maryland
corporation law and certain differences between the rights of shareholders of
the Company and the rights of stockholders of the successor Maryland
corporation. If the Reincorporation is consummated, matters relating to
shareholders' rights, corporate governance and similar matters generally will be
governed by Maryland law rather than California law, and no assurance can be
given that Maryland law with respect to those matters will not be less favorable
to shareholders than California law. See "Description of Common
Stock -- Proposed Reincorporation of the Company."
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DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of its executive officers, J. David
Martin, President and Chief Executive Officer of the Company, and Daniel B.
Platt, Executive Vice President, Chief Financial Officer and Chief
Administrative Officer of the Company, and the loss of their services could have
an adverse affect on the operations of the Company. Mr. Martin has entered into
an employment agreement with the Company.
CONFLICTS OF INTEREST
The Company currently has various development projects which it acquired
from its President and Chief Executive Officer, J. David Martin, concurrently
with Mr. Martin's appointment as President and Chief Executive Officer in 1995.
While the Company has adopted procedures for decision-making with respect to
such projects (including Mr. Martin's absence from Board of Directors meeting
discussions involving such projects), nevertheless the arrangement could result
in conflicts of interest in one or more of the projects.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to sell or rent such property or to borrow using such property as
collateral. Persons who arrange for the disposal or treatment of such hazardous
or toxic substances may also be liable for the costs of removal or remediation
of such substances at a disposal or treatment facility, whether or not such
facility is owned or operated by such person. In connection with the ownership
(direct or indirect), operation, management and development of real properties,
the Company may be considered an owner or operator of such properties or as
having arranged for the disposal or treatment of hazardous or toxic substances
and, therefore, may be potentially liable for removal or remediation costs.
Certain environmental laws impose liability for release of asbestos-containing
materials into the air, and third parties may seek recovery from owners or
operators of real properties for personal injuries associated with
asbestos-containing materials. The Company may be potentially liable for removal
or remediation costs, as well as certain other costs, including governmental
fines and costs related to injuries to persons and property, resulting from the
environmental condition of its Properties, regardless of whether the Company
itself actually contributed to such condition.
RISKS OF LEVERAGE
Neither the Amended and Restated Bylaws of the Company (the "Bylaws") nor
the articles of incorporation of the Company, as amended (the "Articles of
Incorporation"), limit the amount of indebtedness the Company may incur.
Although financial covenants contained in the Company's line of credit facility
(the "Credit Facility") limit the amount of additional indebtedness the Company
may incur, those covenants currently would permit the Company to incur
substantial additional indebtedness. Currently, the maximum committed amount
available under the Company's Credit Facility is $135 million. The Company has
utilized the Credit Facility to finance certain recent acquisitions and may use
the Credit Facility to fund the acquisition of additional properties and for
other general corporate purposes. A portion of the Credit Facility is currently
secured by certain Properties owned by the Company and the Credit Facility
requires that the Company comply with a number of financial covenants. The
Company is also obligated by other indebtedness secured by individual
Properties. There can be no assurances that the Company will be able to meet its
debt service obligations or to comply with the financial covenants in its debt
instruments and, to the extent that it cannot, the lenders typically would be
entitled to demand immediate repayment of the related indebtedness and to
commence foreclosure proceedings against the property securing such
indebtedness, thereby subjecting the Company to the risk of loss of some or all
of its assets, including certain of its Properties. Adverse economic conditions
could cause the terms on which borrowings become available to be unfavorable. In
such circumstances, if the Company is in need of capital to repay indebtedness
in accordance with its terms or otherwise, it could be required to liquidate one
or more investments in Properties at unfavorable prices. The Company will be
subject to the risks normally associated with debt financing, including the risk
that the Company's cash flow will be insufficient to meet required payments of
principal and interest, the risk of
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increases in interest rates on indebtedness (such as borrowings under the Credit
Facility) which bears interest at floating rates, the risk that existing
indebtedness cannot be refinanced or that the terms of such refinancing will not
be as favorable as the terms of existing indebtedness. The Company's mortgage
indebtedness (other than indebtedness under the Credit Facility) is generally
nonrecourse to the Company. However, even with respect to nonrecourse mortgage
indebtedness, the lenders may have the right to recover deficiencies from the
Company in certain circumstances, including fraud, misapplication of funds and
environmental liabilities.
INVESTMENTS IN JOINT VENTURES
In February 1997, the Company conveyed to an institutional investor,
California Urban Investment Partners ("CUIP"), a 75% interest in one of its
Properties, Margarita Plaza. This was accomplished by contributing the Property
to a limited liability company in which the Company has a 25% managing member
interest and CUIP has a 75% managing member interest. As part of the
transaction, CUIP reimbursed the Company for 75% of its acquisition cost of the
Property. The Company has agreed to convey a 75% interest in another one of its
Properties, Ladera Center, in a similar manner.
The Company may in the future acquire interests in limited and general
partnerships, limited liability companies, joint ventures and other enterprises
(collectively, "Joint Ventures") formed to own or develop real property or
interests in real property. The Company may acquire minority interests in
certain such Joint Ventures and also may acquire interests as a passive investor
without rights to actively participate in management of the Joint Ventures.
Investments in Joint Ventures involve additional risks, including the
possibility that the other participants may become bankrupt or have economic or
other business interests or goals which are inconsistent with those of the
Company, that the Company will not have the right or power to direct the
management and policies of the Joint Ventures and that such other participants
may take action contrary to the instructions or requests of the Company and its
policies and objectives or which could jeopardize the Company's ability to
maintain its qualification as a REIT. Such investments may also have the
potential risk of impasse on decisions, such as a sale, because neither the
Company nor any of the other participants have full control over the Joint
Ventures. The Company will, however, seek to maintain sufficient control of such
Joint Ventures to permit the Company's business objectives to be achieved and
its status as a REIT preserved, although there can be no assurance that it will
be successful in doing so, which could have a material adverse effect on the
Company and its ability to make distributions to shareholders. There is no
limitation under the Company's organizational documents as to the amount of
available funds that may be invested in Joint Ventures.
INSURANCE COVERAGE LIMITATIONS
The Company carries comprehensive general liability coverage and umbrella
liability coverage on all of its Properties with limits of liability which the
Company deems adequate (subject to deductibles) to insure against liability
claims and provide for the cost of defense. Similarly, the Company is insured
against the risk of direct physical damage in amounts the Company estimates to
be adequate (subject to deductibles) to reimburse the Company on a replacement
cost basis for costs incurred to repair or rebuild each Property, including loss
of rental income during the reconstruction period. There are, however, certain
types of extraordinary losses which may be either uninsurable, or not
economically insurable. Should any uninsured loss occur, the Company could lose
its investment in, and anticipated revenues from, a Property, which could have a
material adverse effect on the Company and its ability to make distributions to
shareholders. Currently the Company also insures certain of its Properties for
loss caused by earthquake in the aggregate amount of $23 million (subject to
deductibles) and one of its Properties for loss caused by flood. Because of the
high cost of this type of insurance coverage and the wide fluctuations in price
and availability, the Company has made the determination that the risk of loss
due to earthquake and flood does not justify the cost to increase this coverage
any further under current market conditions. However, there can be no assurance
that the occurrence of an earthquake, flood or other natural disaster will not
adversely affect the Company.
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AUTHORITY TO ISSUE PREFERRED STOCK
The Company's articles of incorporation authorize the Board of Directors to
issue up to 5,000,000 shares of Preference Stock ("Preferred Stock") and to
establish the preferences and rights of any such shares issued. See "Description
of Common Stock." The issuance of Preferred Stock would likely result in the
holders of the Preferred Stock being entitled to priority in distributions,
thereby potentially reducing cash available for distribution to holders of
Common Stock, and upon the liquidation of the Company. In addition, the issuance
of Preferred Stock could involve the creation of voting rights for the holders
of Preferred Stock that might result in their voting as a class with the holders
of Common Stock or as a separate class on certain matters, including the
election of one or more Directors of the Company. As a result, the Board of
Directors could, without shareholder action, authorize the issuance of one or
more series of Preferred Stock with voting, distribution, liquidation and other
rights that could adversely affect holders of Common Stock. No shares of
Preferred Stock are currently issued or outstanding.
EFFECT OF VARIOUS MARKET FACTORS ON PRICE OF COMMON STOCK
A variety of factors may influence the price of the Company's Common Stock
in public trading markets. The Company believes that investors generally
perceive REITs as yield-driven investments and compare the annual yield from
distributions by REITs with yields on various other types of financial
instruments. Thus an increase in market interest rates generally could adversely
affect the market price of the Company's Common Stock. Similarly, to the extent
that the investing public has a negative perception of companies in the retail
business or REITs that own and operate retail shopping centers and other
properties catering to retail tenants, the value of the Company's Common Stock
may be negatively impacted in comparison to shares of other REITs owning other
types of properties and catering to different types of tenants.
The market price for the Common Stock may be affected by factors such as
the announcement of new acquisitions or development projects by the Company or
its competitors, quarterly variations in the Company's operating results or the
operating results of the Company's competitors, changes in earnings (losses) or
other estimates by analysts or reported results that vary from such estimates.
In addition, the stock market may experience significant price fluctuations
which could affect the market price of the Company's Common Stock which may be
unrelated to the operating performance of the Company. Following periods of
volatility in the market price of the Company's Common Stock, securities class
action litigation could be initiated against the Company which could result in
substantial costs and a diversion of management's attention and resources, which
would have a material adverse effect on the Company and its ability to make
distributions to shareholders.
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DESCRIPTION OF COMMON STOCK
GENERAL
The Company is authorized to issue 40,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock, each without stated par value. The
shareholders are authorized to vote on all matters entitled to be voted upon by
shareholders as provided in the CGCL. At each election of Directors, each holder
of Common Stock is entitled to vote the number of shares of Common Stock held by
the shareholder for as many persons as there are Directors to be elected by vote
of the holders of Common Stock, or to cumulate the shareholder's votes by giving
one candidate as many votes as equal the number of shares of Common Stock held
by the shareholder multiplied by the number of Directors to be elected by such
holders, or by distributing such votes on the same principle among any number of
such candidates. In the event that the Company's proposed Reincorporation is
consummated, shareholders will thereafter not be permitted to cumulate votes in
the election of directors or otherwise. In addition, the proposed
Reincorporation would also result in an increase in the authorized shares of
stock of the successor Maryland Corporation (as defined below). See "-- Proposed
Reincorporation of the Company."
Subject to any prior rights of any Preferred Stock, each outstanding share
of Common Stock has equal dividend and liquidation rights with every other
outstanding share of Common Stock. Shares of Common Stock are non-assessable and
have no preference, conversion, exchange or preemptive rights.
The following description of certain provisions of the Articles of
Incorporation and Bylaws and of certain provisions of the CGCL and the MGCL (as
defined below) does not purport to be complete and is subject to, and qualified
in its entirety by reference to, the provisions of the Articles of Incorporation
and Bylaws and of the CGCL and MGCL.
REDEMPTION AND RESTRICTION ON TRANSFER OF SHARES
Under the provisions of the Code, one of the requirements for qualification
as a REIT is that at no time during the second half of any taxable year may five
or fewer individuals own, directly or indirectly, more than 50% in value of the
outstanding shares of stock of the REIT.
In order that the Company may meet this requirement at all times, its
Bylaws provide that no person shall at any time directly or indirectly acquire
ownership of more than 9.8% of the outstanding shares of the Company's Common
Stock. Common Stock owned by persons in excess of that amount are deemed "Excess
Shares." For purposes of determining indirect ownership, the constructive
ownership provisions applicable under Section 544(a) of the Code apply. These
provisions attribute ownership of stock owned by a corporation, partnership,
estate or trust proportionately to its shareholders, partners or beneficiaries,
attribute ownership of stock owned by family members to other members of the
same family, treat stock for which a person has an option as actually owned by
that person, and set forth rules as to when stock constructively owned by a
person is considered to be actually owned by such person. Accordingly, shares of
Common Stock owned by a person who actually owns less than 9.8% of those
outstanding may nevertheless be Excess Shares where one or more of the foregoing
relationships exists.
The Bylaws provide that the Company may redeem any shares that are Excess
Shares because of the decrease in outstanding shares resulting from such
redemption. From and after the date of giving notice of redemption (the "notice
date"), the shares called for redemption shall cease to be outstanding and the
holder shall not be entitled to dividends, voting rights or other benefits
except the right to payment by the Company of the redemption price. Subject to
the limitation described in the next sentence, the redemption price will be the
average closing sales price as reported by a national securities exchange or on
the NASDAQ National Market System, as applicable, during the 30-day period
ending on the business day prior to the notice date or, if such shares are not
listed or reported on any such exchange or system, the mean between the average
per share closing bid and asked prices during such 30-day period or, if there
have been no sales on such an exchange or system and no published bid or asked
quotations, the price determined by the Directors in good faith. The Bylaws
further provide that unless the Directors determine that it is in the interest
of the Company to make earlier payment, the redemption price shall be payable
only upon liquidation of the Company and
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shall not exceed the amount which is the sum of the per-share distributions
designated as (i) liquidating distributions, and (ii) return of capital
distributions declared with respect to unredeemed shares subsequent to the
notice date (i.e., the amount per share that a shareholder whose shares are not
redeemed would receive upon liquidation of the Company) and no interest shall
accrue with respect to the periods subsequent to the notice date to the date of
such payment. However, if the person from whom the Excess Shares were redeemed
sells a like number of shares within 30 days of the redemption date, the Company
shall rescind the redemption of the Excess Shares unless counsel to the Company
is of the opinion that such rescission would jeopardize the Company's tax status
as a REIT. In that event, in lieu of rescission, the Company shall make
immediate payment for the shares.
The Bylaws authorize the Company to refuse to effect the transfer of any
shares of Common Stock which would jeopardize the qualification of the Company
as a REIT, and also provide that any purported acquisition of shares of Common
Stock that would result in the disqualification of the Company as a REIT shall
be null and void.
The Bylaws provide that the foregoing provision shall not apply to the
acquisition of shares of Common Stock pursuant to a cash tender offer made for
all outstanding shares of Common Stock of the Company if two-thirds of the
outstanding shares not owned by the tender offeror and its affiliates and
associates are tendered and accepted pursuant to the offer. Such provisions also
do not apply to the acquisition of shares of Common Stock by an underwriter in a
public offering or to any transaction involving the issuance of shares by the
Company when its Board of Directors determines that its qualification as a REIT
would not be jeopardized.
The Bylaws also grant the Board of Directors the authority to cause the
Company, from time to time, to repurchase its shares of Common Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the shares of Common Stock is First
Chicago Trust Company of New York.
PREFERRED STOCK
The Board of Directors of the Company has authority, without shareholder
approval, to issue up to 5,000,000 shares of Preferred Stock, which may be
issued in one or more series with such rights, preferences, privileges and
restrictions as are designated and established by the Board. No shares of
Preferred Stock are currently outstanding and the Board of Directors has not
established any series of Preferred Stock.
PROPOSED REINCORPORATION OF THE COMPANY
General
The Board of Directors has unanimously approved a proposal to change the
Company's state of incorporation from California to Maryland. The
Reincorporation will require the affirmative vote of holders of a majority of
the outstanding shares of Common Stock. The Company intends to submit the
proposed Reincorporation to a vote of its shareholders at its 1997 Annual
Meeting of Shareholders.
The primary purpose of the Reincorporation is to avoid the applicability of
certain provisions under the CGCL which restrict the Company's ability to make
distributions to its shareholders and could potentially prevent the Company from
making distributions in an amount necessary to qualify as a REIT under the Code.
See "Risk Factors -- Distributions to Shareholders," and "-- Proposed
Reincorporation of the Company -- Comparison of Rights of Shareholders of the
Company and Stockholders of the Maryland Corporation."
In determining that the Reincorporation is in the best interests of the
Company's shareholders, the Board of Directors also considered the fact that
Maryland is the state of incorporation for many corporations that qualify as
REITs. As such, the Company believes that Maryland law offers more certainty as
to the rights and
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obligations of the Company, and its directors, officers and shareholders and, as
a result of the Reincorporation, the Company expects greater predictability with
respect to these matters.
In the event that the Reincorporation is not approved, the Company will
continue to operate as a California corporation and will continue to be subject
to California's restrictions on distributions to shareholders.
Merger of the Company into a Newly Formed Maryland Subsidiary
The proposed Reincorporation will be accomplished by merging the Company
into a newly formed Maryland subsidiary of the Company (the "Maryland
Corporation"), pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), a copy of which will be attached as an appendix to the Proxy
Statement for the 1997 Annual Meeting of Shareholders (the "Proxy Statement").
The Maryland Corporation will be incorporated in Maryland specifically for the
purpose of implementing the Reincorporation and will conduct no business and
have no material assets or liabilities prior to the Reincorporation. After
completion of the merger, the Company will cease to exist under California law
and the Maryland Corporation will continue to operate the business of the
Company under the name Burnham Pacific Properties, Inc. The authorized capital
of the Maryland Corporation will consist of 75,000,000 shares of common stock,
5,000,000 shares of preferred stock and 20,000,000 shares of Excess Stock
(defined below), each with a par value of $.01 per share. Under the Merger
Agreement, each outstanding share of the Company's Common Stock will be
automatically converted into one share of the Maryland Corporation's common
stock (the "Maryland Common Stock") at the effective time of the merger. The
Reincorporation will not result in any change in the Company's management,
business, assets or liabilities and will not result in any relocation of
management or other employees. The Reincorporation will not result in
recognition of any gain or loss to the Company or any of the shareholders for
federal income tax purposes. Shareholders of the Company will have no
dissenters' rights of appraisal with respect to the Reincorporation proposal.
As discussed below, the rights of holders of Maryland Common Stock will
differ in certain respects from the rights of holders of the Company's Common
Stock, including the fact that holders of the Maryland Common Stock will not be
entitled to cumulative voting rights in the election of directors. See "--
Proposed Reincorporation of the Company -- Comparison of Rights of Shareholders
of the Company and Stockholders of the Maryland Corporation". The Maryland
Common Stock will continue to be listed, without interruption, on the New York
Stock Exchange (the "NYSE") under the same symbol "BPP" as the Company's Common
Stock prior to the merger.
Comparison of Rights of Shareholders of the Company and Stockholders of the
Maryland Corporation
The Company is organized as a corporation under the laws of the State of
California and the Maryland Corporation will be organized as a corporation under
the laws of the State of Maryland. As a California corporation, the Company is
subject to the CGCL, a general corporation statute dealing with a wide variety
of matters, including election, tenure, duties and liabilities of directors and
officers; dividends and other distributions; rights of shareholders; and
extraordinary actions, such as amendments to the articles of incorporation,
mergers, sales of all or substantially all of the Company's assets and
dissolution. The Company also is governed by its Articles of Incorporation (the
"California Articles"), and its Bylaws (the "California Bylaws"), which have
been adopted pursuant to the CGCL. As a Maryland corporation, the Maryland
Corporation will be governed by the Maryland General Corporation Law ("MGCL"), a
general corporation statute covering substantially the same matters as are
covered by the CGCL, and by the Articles of Incorporation and Bylaws of the
Maryland Corporation (the "Maryland Articles" and "Maryland Bylaws",
respectively). A number of differences between the CGCL and the MGCL and among
these various documents are summarized below. The CGCL refers to "shareholders"
and the MGCL refers to "stockholders." The use of either term refers to the
holders of capital stock of the Company or the Maryland Corporation as the case
may be.
The discussion of the comparative rights of the shareholders of the Company
and the stockholders of the Maryland Corporation set forth below does not
purport to be complete and is subject to and qualified in its
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entirety by reference to the CGCL and the MGCL and also to the California
Articles, California Bylaws, Maryland Articles and Maryland Bylaws, copies of
which are available from the Company as described under "Available Information".
Dividends and Other Distributions. Under the CGCL, the Company may only
make a distribution to shareholders if (i) its retained earnings immediately
prior to payment of the distribution are at least equal to the amount of the
distribution, or (ii) generally, its total assets (determined on the basis of
their depreciated historical cost in accordance with GAAP and exclusive of
certain intangible assets and certain other charges and expenses) are equal to
at least 1 1/4 times its total liabilities (excluding certain deferred items)
immediately after giving effect to the distribution. The CGCL also prohibits a
California corporation from making any distribution to shareholders if the
corporation is or, as a result thereof, would be likely to be unable to meet its
liabilities as they mature. The CGCL also imposes certain further limitations on
distributions on common stock if capital stock with a preference on
distributions of assets upon liquidation is outstanding. The MGCL allows the
payment of dividends and other distributions unless after giving effect to the
distribution, (i) the corporation would not be able to pay its indebtedness as
it becomes due in the ordinary course of business or (ii) the corporation's
total assets would be less than the sum of the corporation's liabilities plus,
unless the charter provides otherwise (which the Maryland Articles do not), the
amount that would be needed upon dissolution to satisfy the preferential rights
of those stockholders whose preferential rights upon dissolution are superior to
those receiving the distribution. The MGCL provision regarding distributions is
therefore more favorable to the Company in the context of its continuing ability
to make distributions to its stockholders, including distributions required to
retain its qualification as a REIT.
Shareholder Voting Rights. California law provides for cumulative voting
in the election of directors (which permits holders of less than a majority of
the voting securities of a corporation to cumulate their votes and elect a
director or directors in certain situations) but permits the elimination thereof
in the case of a listed corporation (which is defined as a corporation that has
shares listed on the NYSE or other national securities exchanges). The
California Bylaws specifically provide for cumulative voting. Under the MGCL,
cumulative voting is not available unless so provided in the corporation's
articles of incorporation. The Maryland Articles do not provide for cumulative
voting. As a result, holders of a majority of the shares of Maryland Common
Stock will generally be entitled to elect all of the directors of the Maryland
Corporation.
With certain exceptions, the CGCL requires that mergers, reorganizations,
certain sales of assets and similar transactions be approved by the holders of a
majority of each class of shares outstanding. In contrast, the MGCL requires,
with certain exceptions, that the holders of two-thirds of all shares entitled
to vote on the matter must approve mergers, consolidations, share exchanges and
transfers of assets unless the charter provides for a different number not less
than a majority; the Maryland Articles provide that such matters may be approved
by the holders of a majority of shares entitled to vote on the matter.
Under the CGCL, the articles of incorporation and bylaws of California
corporations may include supermajority voting provisions. These provisions,
however, must be renewed every two years and may not require a vote in excess of
66 2/3% of the outstanding shares. In contrast, under the MGCL, the articles of
incorporation of a Maryland corporation may include supermajority voting
provisions without restrictions. The Maryland Articles currently do not contain
any supermajority voting provisions.
Limitation of Liability. Pursuant to the CGCL and the California Articles,
the liability of directors of the Company to the Company or to any shareholder
of the Company for money damages for breach of fiduciary duty has been
eliminated, except (i) for acts or omissions that involve intentional misconduct
or a knowing and culpable violation of the law, (ii) for acts or omissions that
a director believes to be contrary to the best interests of the Company or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show a reckless disregard for
the director's duty to the Company or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing a director's duties, of a risk of serious injury to the Company or
its shareholders, (v) for acts or
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omissions that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Company or its shareholders, (vi) for
violations of the CGCL requirements governing Company contracts in which the
director has a material interest, or (vii) for corporate actions for which the
director and the Company are jointly and severally liable. In general, the
liability of officers may not be eliminated or limited under California law.
Pursuant to the MGCL and the Maryland Articles, the liability of directors
and officers to the Maryland Corporation or to any stockholder of the Maryland
Corporation for money damages will be eliminated, except for (i) actual receipt
of an improper personal benefit in money, property or services or (ii) active
and deliberate dishonesty established by a final judgment as being material to
the cause of action. Maryland law therefore permits the limitation of directors'
and officers' liability in a broader range of circumstances than does California
law. As a result, the directors and officers of the Maryland Corporation may not
be liable for certain actions for which they might have otherwise been liable
under California law.
Indemnification of Directors and Officers. The Bylaws of both the Company
and the Maryland Corporation require the Company and the Maryland Corporation to
indemnify, and advance expenses to, their respective present and former
directors, officers and employees to the maximum extent permitted by the CGCL or
the MGCL, as applicable.
The CGCL contains provisions authorizing corporations to indemnify an
officer or director if such officer or director acted in good faith and in a
manner that such officer or director reasonably believed to be in the best
interest of the corporation. The CGCL also permits the corporation to advance
expenses to a director or officer, provided that the corporation receives an
undertaking, usually in the form of a bond, by or on behalf of such director or
officer to repay any amounts advanced if it is determined ultimately that the
director or officer is not entitled to be indemnified under the CGCL. Under the
CGCL, the termination of any proceeding by conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that
such person failed to meet the standard of conduct necessary to allow
indemnification.
In addition, the CGCL permits indemnification in derivative actions except
that (i) indemnification may only be made with court approval when a person is
adjudged liable to the corporation in the performance of that person's duty to
the corporation and its shareholders and (ii) indemnification of amounts paid to
settle and/or expenses incurred to defend a threatened or pending action shall
not be made when such threatened or pending action is settled or otherwise
disposed of without court approval. No indemnification is permitted under the
CGCL for the actions for which liability for money damages may not be limited,
as described above under "-- Proposed Reincorporation of the Company --
Limitation of Liability."
The MGCL permits indemnification for amounts paid in settlement of a
proceeding by or in the right of a corporation; however, indemnification is
prohibited if the person seeking indemnification has been found liable to the
corporation in a proceeding brought by or in the right of the corporation,
unless otherwise ordered by a court and then only for expenses. In contrast to
California law, under Maryland law a termination of a proceeding by conviction
or upon a plea of nolo contendere or its equivalent creates a rebuttable
presumption that such person did not meet the requisite standard of conduct to
allow indemnification.
Removal of Directors. Under the CGCL and the California Bylaws, any or all
directors may be removed with or without cause if the removal is approved by a
majority of the outstanding shares entitled to vote, except that no director may
be removed (unless the entire board is removed) when the votes cast against
removal would be sufficient to elect the director if voted cumulatively at an
election at which the same total number of votes were cast and the entire number
of directors authorized at the time of the most recent election were then being
elected. The CGCL also provides that the superior court of the proper county
may, at the request of shareholders holding at least 10% of the number of
outstanding shares of any class, remove from office any director in case of
fraudulent or dishonest acts or gross abuse of authority or discretion with
reference to the corporation and may bar from reelection any director so removed
for a period prescribed by the court.
The MGCL provides that the stockholders of a corporation may remove any
director, with or without cause, by the affirmative vote of a majority of all
the votes entitled to be cast for the election of directors, unless the charter
of the corporation provides otherwise. The MGCL further states that if the
stockholders of
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any class or series are entitled separately to elect one or more directors, a
director elected by a class or series may not be removed without cause except by
the affirmative vote of a majority of all of the votes of that class or series,
unless the charter of the corporation provides otherwise. The Maryland Articles
provide that directors may be removed only for cause following a hearing. In
contrast to California law, the MGCL does not provide for the removal of
directors by a court upon petition of shareholders.
Special Meetings of Shareholders. The CGCL and the California Bylaws
provide that a special meeting of shareholders may be called by the Board of
Directors, the Chairman of the Board, the President, or by the holders of shares
entitled to cast not less than 10% of the votes at the meeting. Under the MGCL
and the Maryland Bylaws, a special meeting of stockholders may be called by the
Chairman of the Board, the President or a majority of the Board of Directors and
shall be called by the Secretary of the Maryland Corporation at the request in
writing of shareholders entitled to cast a majority of all the votes entitled to
be cast at the meeting. The MGCL and the Maryland Bylaws also provide, however,
that unless requested by stockholders entitled to cast a majority of all the
votes entitled to be cast at such meeting, a special meeting need not be called
to consider any matter which is substantially the same as a matter voted on at
any special meeting of the stockholders held during the preceding 12 months.
Thus, the stockholders' right to call a special meeting under Maryland law is
more limited than under California law.
Inspection of Books and Records. Under the CGCL, upon written demand for
any purpose reasonably related to the shareholder's interest as a shareholder,
any shareholder of the Company may inspect and copy the record of shareholders
and inspect any other corporate books and records. A shareholder or shareholders
(i) who hold at least 5% of the outstanding voting shares of the corporation or
(ii) who hold at least 1% of those voting shares and have filed a Schedule 14A
with the Securities and Exchange Commission shall have an absolute right to
inspect and copy the record of shareholders. These rights apply both to any
California corporation and any foreign corporation that keeps such records in
California or has its principal executive office in California. Thus, the
inspection rights provided by the CGCL will be applicable to the Maryland
Corporation after the Reincorporation.
The MGCL provides a right to inspect and copy the corporation's books of
account and stock ledger to individuals who have been stockholders for more than
six months and own at least 5% of any class of a Maryland corporation's
outstanding shares. In addition, any stockholder of a Maryland corporation has
the right to inspect certain corporate records and to request that the
corporation provide a sworn statement showing all stock and securities issued
and all consideration received by the corporation within the preceding 12
months.
Amendments to Bylaws and Articles. Under the CGCL, a corporation's bylaws
may be adopted, amended or repealed by approval of the shareholders or by the
board of directors; however, the shareholders may never be divested of the power
to adopt, amend or repeal the bylaws. In addition, the CGCL provides that a
bylaw changing a fixed number of directors or the maximum or minimum number of
directors may only be adopted by the holders of a majority of the shares
entitled to vote. The California Bylaws provide that no amendment thereto may be
made unless approved by the vote of the holders of a majority of the voting
securities outstanding.
Under the MGCL, the power to adopt, alter and repeal the bylaws is vested
in the stockholders except to the extent that the charter or bylaws vest such
power in the board of directors. The Maryland Articles and the Maryland Bylaws
provide that the Maryland Board of Directors shall have the power to adopt,
amend or repeal the Maryland Bylaws, provided that any such action may only be
taken by the affirmative vote of no less than two-thirds of all directors at the
time. Alternatively, the Maryland Articles and the Maryland Bylaws provide that
the Maryland Bylaws may be adopted, amended or repealed by the affirmative vote
of a majority of the Maryland Board of Directors and of all the votes cast by
holders of shares of stock entitled to vote generally in the election of
directors.
Under California law, the articles of incorporation may be amended only if
such amendment is approved by the board of directors and by the holders of a
majority of the outstanding shares of stock entitled to vote on the matter.
Under Maryland law, an amendment to the charter of a corporation must be
approved by the board of directors and the holders of two-thirds of the shares
entitled to vote on such matter unless such
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articles provide for a different vote not less than a majority of such shares so
entitled to vote; the Maryland Articles provide that they may be amended by the
holders of a majority of the shares entitled to vote on such matter.
Limit on Share Ownership; "Excess Stock." Both the California Bylaws and
the Maryland Articles contain provisions limiting the ownership of shares which
are intended to ensure that the Company and the Maryland Corporation meet the
requirements of the Code for qualification as a REIT. Among other things, these
provisions are intended to meet the requirement of the Code that, at no time
during the second half of any taxable year, may five or fewer individuals
(defined in the Code to include certain entities) own more than 50% in value of
the outstanding capital stock. The limitations currently applicable to the
Company are described above under "-- Redemption and Restriction on Transfer of
Shares."
The Maryland Articles limit any holder from owning, or being deemed to own
after applying the constructive ownership provisions of the Code described
above, shares of stock of the Maryland Corporation having a value that is more
than 9.8% (the "Ownership Limit") of the value of all outstanding stock of the
Maryland Corporation. Under the Maryland Articles, any transfer of stock or any
security convertible into stock that would create direct or indirect ownership
of stock in excess of the Ownership Limit (a "prohibited transfer") shall be
null and void, and the intended transferee will acquire no rights to the stock.
Shares of stock owned, or deemed to be owned, or transferred to a stockholder in
excess of the Ownership Limit will automatically be exchanged for shares of the
Maryland Corporation's Excess Stock (the "Excess Stock") that will be
transferred, by operation of law, to an unaffiliated trustee to be named by the
Board of Directors of the Maryland Corporation for the exclusive benefit (except
to the extent described below) of one or more charitable beneficiaries
designated from time to time by the Maryland Corporation. The Excess Stock held
in trust will be considered as issued and outstanding shares of stock of the
Maryland Corporation, will be entitled to receive distributions authorized and
declared by the Maryland Corporation and may be voted by the trustee for the
exclusive benefit of the charitable beneficiary. Any dividend or distribution
paid to a purported transferee of Excess Stock prior to the discovery by the
Maryland Corporation that stock has been transferred in a prohibited transfer
shall be repaid to the Maryland Corporation upon demand and thereupon paid over
by the Maryland Corporation to the trustee. Subject to applicable law, any votes
of holders of shares of stock purported to have been cast by a purported
transferee prior to such discovery of a prohibited transfer will be
retroactively deemed not to have been cast and may be recast by the trustee for
the benefit of the charitable beneficiary, but said retroactive nullification or
recant of the vote of the relevant shares of stock shall not adversely affect
the rights of any person (other than the purported transferee) who has relied in
good faith upon the effectiveness of the matter that was the subject of the
stockholder action as to which such votes were cast.
Excess Stock is not transferable. Subject to the redemption rights of the
Maryland Corporation, discussed below, the trustee of the trust may, however,
sell and transfer the interest in the trust to a transferee in whose hands the
interest in the trust representing Excess Stock would not be an interest in
Excess Stock, and upon such sale the shares of Excess Stock represented by the
sold interest shall be automatically exchanged for shares of stock of the class
that was originally exchanged into such Excess Stock. Upon such sale, the
trustee shall distribute to the purported transferee only so much of the sales
proceeds as is not more than the price paid by the purported transferee in the
prohibited transfer that resulted in the exchange of Excess Stock for the stock
purported to have been transferred (or, if the purported transferee received
such stock by gift, devise or otherwise without giving value for such stock,
only an amount that does not exceed the market price for such stock, as
determined in the manner set forth in the Maryland Articles, at the time of the
prohibited transfer), and the trustee shall distribute all remaining proceeds
from such sale to the charitable beneficiary.
In addition to the foregoing transfer restrictions, the Maryland
Corporation will have the right, for a period of 90 days during the time any
Excess Stock is held by the trustee, to purchase all or any portion of the
Excess Stock from the trustee for the lesser of the price paid for the stock by
the original purported transferee (or, if the purported transferee received such
stock by gift, devise or otherwise without giving value for such stock, the
market price of the stock as determined in the manner set forth in the Maryland
Articles at the time of such prohibited transfer) or the market price (as so
determined) of the stock on the date the Maryland Corporation exercises its
right to purchase. Upon any such purchase by the Maryland Corporation, the
trustee
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shall distribute the purchase price to the original purported transferee. The
90-day period begins on the date on which the Maryland Corporation receives
written notice of the prohibited transfer or other event resulting in the
exchange of stock for Excess Stock.
Both the California Bylaws and the Maryland Articles authorize the Board of
Directors to permit a transfer which would otherwise be prohibited if the Board
is satisfied that such transfer will not jeopardize the Company's or the
Maryland Corporation's status as a REIT. Both also provide that the provisions
relating to Excess Shares or the Ownership Limit shall not apply to shares of
capital stock acquired pursuant to an all-cash tender offer for all outstanding
shares of capital stock in conformity with applicable laws where not less than
two-thirds of the outstanding shares of capital stock (not including securities
held by the tender offeror and/or its affiliates and associates) are tendered
and accepted pursuant to such tender offer and, in the case of the Maryland
Corporation, where the tender offeror commits in such tender offer, if the offer
is accepted by the holders of two-thirds of the outstanding stock, promptly
after the tender offeror's purchase of the tendered stock to give any
non-tendering stockholders a reasonable opportunity to "put" their shares of
stock to the tender offeror at a price not less than that paid pursuant to the
tender offer.
Business Combination Statute. Under the MGCL, certain "business
combinations" (including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of the corporation's shares or an affiliate of
the corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Maryland
Stockholder") or an affiliate thereof are prohibited for five years following
the date on which the Interested Maryland Stockholder becomes an Interested
Maryland Stockholder. Thereafter, the MGCL provides that any such business
combination must be recommended by the board of directors of such corporation
and approved by the affirmative vote of at least (a) 80% of the votes entitled
to be cast by holders of outstanding voting shares of the corporation and (b)
two-thirds of the votes entitled to be cast by holders of outstanding voting
shares of the corporation other than shares held by the Interested Maryland
Stockholder with whom the business combination is to be effected, unless, among
other things, the corporation's stockholders receive a minimum price (as defined
in the MGCL) for their shares and the consideration is received in cash or in
the same form as previously paid by the Interested Maryland Stockholder for its
shares. These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Maryland Stockholder becomes
an Interested Maryland Stockholder.
Pursuant to the authority granted under the MGCL, the Board of Directors
will adopt a resolution providing that the "business combination" provisions of
the MGCL shall not apply to the Maryland Corporation. This resolution will only
be revoked if the Maryland Board of Directors determines that such revocation is
in the best interests of the Maryland Corporation and its stockholders.
California law does not include a business combination statute. However,
the CGCL requires delivery of a fairness opinion in connection with some
business combination transactions between a corporation and an interested party
(an "Interested Party"). The CGCL defines "Interested Party" to include (i) a
person who directly or indirectly controls the corporation that is the subject
of the proposed combination, (ii) is directly or indirectly controlled by an
officer or director of the subject corporation or (iii) is an entity in which a
material financial interest is held by any director or executive officer of the
subject corporation.
Control Share Acquisition Statute. The MGCL contains an additional
provision which eliminates the voting rights of "control shares" in certain
circumstances. The MGCL provides that a person (the "acquiror") who proposes to
acquire or acquires "control shares" of a Maryland corporation must obtain the
approval of the holders of two-thirds of the shares entitled to vote on the
matter (excluding shares of stock owned by the acquiror, by officers or by
directors who are employees of the corporation) in order to vote the control
shares that the acquiror acquires. "Control shares" are voting shares of stock
which, if aggregated with all other shares of stock previously acquired by such
person, would entitle the acquiror to exercise voting power (except solely by
virtue of a revocable proxy) in electing directors within one of the following
ranges of voting power:
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(i) one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority, or (iii) a majority of all voting power. Control shares do not
include shares that the acquiror is then entitled to vote as a result of having
previously obtained stockholder approval.
The MGCL permits a Maryland corporation to elect not to be governed by the
control share acquisition statute by including a provision in its bylaws opting
out of the application of the control share acquisition provision of the MGCL.
The Maryland Corporation has included such a provision in the Maryland Bylaws.
The Maryland Board of Directors may, at any time, without stockholder approval,
vote to amend the Maryland Bylaws to eliminate this provision, which would
result in the Maryland Corporation being governed by the control share
acquisition statute. The Maryland Bylaws will only be amended by the Maryland
Board of Directors in the future to eliminate this provision if the Maryland
Board of Directors determines that it is in the best interests of the
stockholders to do so.
Unlike Maryland, California does not have a control share acquisition
statute.
Interested Director Transactions. Under both California and Maryland law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable solely because of such
interest if certain conditions are met. Under California and Maryland law, (i)
either the shareholders or the board of directors must approve any contract or
transaction after full disclosure of the material facts (and in the case of
board approval in California, the contract or transaction must also be "just and
reasonable") or (ii) the contract or transaction must have been just and
reasonable or fair and reasonable, as applicable, at the time it was authorized
or approved. California law has a more stringent requirement than Maryland law
in circumstances where board approval is sought with respect to an interested
director transaction because the contract or transaction must be just and
reasonable and must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum). Under the MGCL,
if board approval is sought, there is no requirement that the contract or
transaction be fair and reasonable and the approval for the contract or
transaction may be obtained by a majority vote of the disinterested directors
(even though less than a majority of a quorum). The Maryland Board of Directors,
therefore, may be able to approve certain transactions under Maryland law that
the Company's Board of Directors would not be able to approve under California
law because more than a majority of a quorum of directors are interested
directors. See "Risk Factors -- Conflicts of Interest".
The CGCL also provides that any loan or guarantee to or for the benefit of
a director or officer of the corporation or its parent requires the approval of
the shareholders unless such loan or guaranty is pursuant to a plan that has
been approved by the holders of a majority of the outstanding shares. However,
under the CGCL, the bylaws of a corporation with more than 100 shareholders may
authorize the board of directors alone to approve loans or guaranties to
directors and officers. The California Bylaws do not currently contain such a
provision allowing the directors to approve such loans or guaranties.
In contrast, under the MGCL, a corporation may make loans to or guarantee
the obligations of its officers and employees if, in the judgment of the board
of directors, such loan or guaranty may reasonably be expected to benefit the
corporation.
DESCRIPTION OF DEBENTURES
The Debentures will be issued in one or more series under an Indenture
which may be supplemented by supplemental indentures (the "Indenture") between
the Company and Fleet Bank of Massachusetts, N.A., as Trustee (the "Trustee") or
another trustee named in an applicable Prospectus Supplement. The terms of the
Debentures include those stated in the Indenture and those made part of the
Indenture (before any supplements) by reference to the Trust Indenture Act of
1939, as amended (the "Act"). A copy of the form of the Indenture is filed as an
exhibit to the Registration Statement and is incorporated herein by reference.
The following is a summary of certain provisions of the Indenture, does not
purport to be complete, and is qualified in its entirety by reference to the
detailed provisions of the Indenture (including the form of
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Debenture attached thereto). Parenthetical references to sections are references
to the corresponding section of the Indenture unless otherwise indicated.
The terms of the Debentures offered in any Prospectus Supplement may differ
from the terms set forth below, in which case the terms set forth below shall be
deemed to have been superseded to the extent of any different terms set forth in
such Prospectus Supplement.
GENERAL
The Indenture does not limit the aggregate principal amount of Debentures
that may be issued thereunder and provides that Debentures may be issued from
time to time in one or more series. The Debentures will be unsecured general
obligations of the Company convertible into shares of Common Stock of the
Company. Debentures of any series will bear interest from the date set forth in
the applicable Prospectus Supplement at the rate shown on the cover page of the
applicable Prospectus Supplement. Principal (and premium, if any) and interest
will be payable, the Debentures will be convertible and exchangeable, and
transfers will be registrable, at the office or agency of the Company maintained
for such purposes, initially at the offices of the Trustee. The Company may pay
principal (and a premium, if any) and interest by check and may mail an interest
check to the address of the person entitled thereto as it appears in the
Debenture Register (Paragraph 2 of the Debenture).
The Debentures will be issued only in fully registered form in
denominations of $1,000 principal amount or any integral multiple thereof
(Section 2.03). The Debentures are exchangeable and transfers thereof will be
registrable without charge therefor, except that the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith (Section 2.06).
Conversion Rights. Any portion of the principal amount of any Debentures
of any series which is $1,000 or an integral multiple thereof will be
convertible into shares of Common Stock of the Company at any time prior to
redemption or maturity, following the date set forth in the applicable
Prospectus Supplement. The conversion price or rate will be set forth on the
cover of the applicable Prospectus Supplement (subject to adjustments as
described below), except that the right to convert Debentures of a series called
for redemption will terminate at the close of business on the specific
redemption date and will be lost if not exercised prior to that time (Section
10.01).
To protect the Company's status as a REIT, a registered holder of
Debentures (a "Holder") may not convert any Debenture, if as a result of such
conversion any Person would then be deemed to beneficially own 9.8% or more in
value of the Company's shares (Paragraph 7 of the Debenture).
The conversion price will be subject to adjustment under certain
conditions, including (i) the payment of dividends (and other distributions) in
shares of Common Stock on any class of shares of capital stock of the Company;
(ii) subdivisions, combinations and reclassifications of shares of Common Stock;
(iii) the issuance to all or substantially all holders of shares of Common Stock
of rights or warrants entitling them to subscribe for or purchase shares of
Common Stock at a price per share (or having a conversion price per share) at
less than the current market price, as defined (but shares of Common Stock
issued under the Company's dividend reinvestment plan or stock option plan will
not be deemed to be issued pursuant to rights or warrants for this purpose); and
(iv) distributions to all or substantially all holders of shares of Common
Stock, or evidences of indebtedness or assets (including securities, but
excluding those rights, warrants, dividends and distributions referred to above
and dividends and distributions not prohibited under the terms of the Indenture
including purchase rights under the dividend reinvestment plan) of the Company;
subject to the limitation that all adjustments by reason of any of the foregoing
need not be made until they result in a cumulative change in the conversion
price of at least 1%. In the event the Company shall effect any capital
reorganization or reclassification of its shares of Common Stock or shall
consolidate or merge with or into any trust or corporation (other than a
consolidation or merger in which the Company is the surviving entity) or shall
sell or transfer all or substantially all its assets, the Holders of any series
of the Debentures shall, if entitled to convert such Debentures at any time
after such transaction, receive upon conversion thereof, in lieu of each share
of Common Stock into which the Debentures would have been convertible prior to
such transaction, the same
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kind and amount of stock and other securities, cash or property as shall have
been issuable or distributable in connection with such transaction with respect
to each share of Common Stock (Sections 10.04 and 10.10).
A conversion price adjustment made according to the provisions of the
Debentures of any series (or the absence of provision for such an adjustment)
might result in a constructive distribution to the Holders of Debentures of such
series or shares of Common Stock that would be subject to taxation as a
dividend. The Company may, at its option, make such reductions in the conversion
price, in addition to those set forth above, as the Board of Directors deems
advisable to avoid or diminish any income tax to holders of shares of Common
Stock resulting from any dividend or distribution of shares of Common Stock (or
rights to acquire shares of Common Stock) or from any event treated as such for
income tax purposes or for any other reason. The Board will have the power to
resolve any ambiguity or correct any error in the provision relating to the
adjustment of the conversion price of the Debentures of such series. Its actions
shall be final and conclusive (Section 10.04).
Fractional shares will not be issued upon conversion, but, in lieu thereof,
the Company will pay a cash adjustment based upon market price (Section 10.08).
The Holders of Debentures at the close of business on an interest payment
record date shall be entitled to receive the interest payable on such Debentures
on the corresponding interest payment date notwithstanding the conversion
thereof. However, Debentures surrendered for conversion during the period from
the close of business on any record date to the opening of business on the
corresponding interest payment date must be accompanied by payment of an amount
equal to the interest payable on such interest payment date. If a Debenture is
converted on an interest payment date, the interest payable on such date will be
paid to the person who was the record Holder at the close of business on the
corresponding interest payment record date, and the converting Holder need not
include payment of such interest upon surrender of the Debentures for
conversion. Except as aforesaid, no payment or adjustment is to be made on
conversion for interest accrued on the Debentures or for dividends on shares of
Common Stock (Section 10.03).
Subordination of Debentures. The indebtedness evidenced by the Debentures
of any series will be subordinated and junior in right of payment to the extent
set forth in the Indenture to the prior payment in full of amounts then due on
all Senior Indebtedness (as defined). No payment shall be made by the Company on
account of principal of (or premium, if any) or interest on the Debentures of
any series or on account of the purchase or other acquisition of Debentures of
any series, if there shall have occurred and be continuing a default with
respect to any Senior Indebtedness permitting the holders to accelerate the
maturity thereof or with respect to the payment of any Senior Indebtedness, and
such default shall be the subject of a judicial proceeding or the Company shall
have received notice of such default from any holder of Senior Indebtedness,
unless and until such default or event of default shall have been cured or
waived or shall have ceased to exist. By reason of these provisions, in the
event of default on any Senior Indebtedness, whether now outstanding or
hereafter issued, payments of principal of (and premium if any) and interest on
the Debentures of any series may not be permitted to be made until such Senior
Indebtedness is paid in full, or the event of default on such Senior
Indebtedness is cured or waived (Section 11.02).
Upon any acceleration of the principal of the Debentures or any
distribution of assets of the Company upon any receivership, dissolution,
winding-up, liquidation, reorganization, or similar proceedings of the Company,
whether voluntary or involuntary, or in bankruptcy or insolvency, all amounts
due or to become due upon all Senior Indebtedness must be paid in full before
the Holders of the Debentures of any series or the Trustee are entitled to
receive or retain any assets so distributed in respect of the Debentures
(Section 11.02). By reason of this provision, in the event of insolvency,
Holders of the Debentures of any series may recover less, ratably, than holders
of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal, premium, if any,
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-filing interest is allowed in such proceeding), fees,
charges, expenses, reimbursement and indemnification obligations, and all other
amounts payable under or in respect of Indebtedness (as defined) of the Company,
whether any such Indebtedness exists as of the date of the Indenture or is
created, incurred, assumed or guaranteed after such date. The aggregate amount
of Senior
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Indebtedness of the Company (excluding its subsidiaries) outstanding at December
31, 1996 was approximately $178,000,000. There is no limit under the Indenture
on the amount of Senior Indebtedness that the Company may incur (Section 11.01).
"Indebtedness" with respect to any Person is defined to mean:
(i) all indebtedness for money borrowed whether or not evidenced by a
promissory note, draft, or similar instrument;
(ii) that portion of obligations with respect to leases that is
properly classified as a liability on a balance sheet in accordance with
generally accepted accounting principles;
(iii) notes payable and drafts accepted representing extensions of
credit;
(iv) any balance owed for all or any part of the deferred purchase
price of property or services which purchase price is due more than six
months from the date of incurrence of the obligation in respect thereof
(except any such balance that constitutes (a) a trade payable or an accrued
liability arising in the ordinary course of business or (b) a trade draft
or note payable issued in the ordinary course of business in connection
with the purchase of goods or services), if and to the extent such debt
would appear as a liability upon a balance sheet of such person prepared in
accordance with generally accepted accounting principles; and
(v) any deferral, amendment, renewal, extension, supplement or
refunding of any liability of the kind described in any of the preceding
clauses (i) through (iv).
Optional Redemption. The Debentures of any series will be subject to
redemption, in whole or in part, on any date subsequent to the date set forth in
the Prospectus Supplement at the option of the Company on not less than 30 nor
more than 60 days' prior notice by mail at a redemption price equal to 100% (or
such greater price as is set forth in the Prospectus Supplement relating to such
series of Debentures) of the principal amount, plus interest accrued to the date
of redemption (Section 3.01). The Company may exercise its redemption powers
over a Holder's Debentures at any time to the extent deemed sufficient by the
Company to prevent the Holder of such securities or any other person having an
interest therein if such securities were converted into Common Stock from being
deemed to own Excess Shares or, following the Reincorporation, Excess Stock.
(See "Description of Common Stock -- Redemption and Restriction on Transfer of
Shares").
Modification of the Indenture. With certain exceptions, the rights and
obligations of the Company and the rights of Holders of any series of Debentures
may only be modified by the Company and the Trustee with the consent of the
Holders of at least a majority in outstanding principal amount of each series of
affected Debentures. Without the consent of each affected Debenture Holder, no
amendment or waiver of supplement may (i) reduce the principal of, or premium,
if any, or rate of interest on, any Debenture; (ii) change the stated maturity
date of the principal of, or any installment of interest on, any Debenture;
(iii) waive a default in the payment of the principal amount of, or the interest
on, or any premium payable on redemption of, any Debenture; (iv) change the
currency for payment of the principal of, or premium or interest on, any
Debenture; (v) impair the right to institute suit for the enforcement of any
such payment when due; (vi) adversely affect the right to convert any Debenture;
(vii) reduce the amount of outstanding Debentures necessary to consent to an
amendment or waiver provided for in the Indenture; or (viii) modify any
provisions of the Indenture relating to the modification, supplement and
amendment of the Indenture or waivers of past defaults, except as otherwise
specified (Section 9.02).
Events of Default, Notice and Waiver. The following are Events of Default
under the Indenture with respect to the Debentures of any series: (i) default in
the payment of interest on any Debentures of such series when due and payable,
which continues for 30 days; (ii) default in the payment of principal of (or
premium, if any) on any Debentures of such series when due, whether at maturity,
upon redemption or otherwise; (iii) failure to perform any other covenant of the
Company contained in the Indenture or any Debenture of such series which
continues for 60 days after written notice is given as provided in the Indenture
(other than a covenant included in the Indenture solely for the benefit of one
or more series of Debentures other than such series); (iv) default under any
bond, debenture or other Indebtedness of the Company or any subsidiary if
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(a) either (x) such event of default results from the failure to pay any such
Indebtedness when due or (y) as a result of such event of default, the maturity
of such Indebtedness has been accelerated prior to its expressed maturity and
such acceleration shall not be rescinded or annulled or the accelerated amount
paid within ten days after notice to the Company of such acceleration, and (b)
the principal amount of such Indebtedness, together with the principal amount of
any other Indebtedness in default for failure to pay principal or interest
thereon, or the maturity of which has been so accelerated, aggregates
$10,000,000 or more; and (v) certain events of bankruptcy, insolvency or
reorganization relating to the Company (Section 6.01). If an Event of Default
shall occur and be continuing, the Trustee or the Holders of a majority in
aggregate principal amount of any Debentures may declare the Debentures due and
payable (Section 6.02).
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of any Default or Event of Default with respect to the Debentures of
any series, give to the Holders of Debentures of such series notice of all
uncured Defaults or Events of Default known to it. The Trustee shall be
protected if in good faith it determines that the withholding of such notice is
in the interest of the Holders of Debentures of any series, except in the case
of a default in the payment of the principal of (or premium, if any) or interest
on any of the Debentures of such series in which event notice must be given
(Section 7.05).
The Indenture provides that the Holders of a majority in aggregate
principal amount of the outstanding Debentures of any series may direct the
time, method and place of conducting any proceedings for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Debentures of such series (Section 6.05). The right of a Holder
to institute a proceeding with respect to the Indenture is subject to certain
conditions including notice and indemnity to the Trustee, but the Holder has an
absolute right to receipt of principal of (and premium, if any) and interest on
such Holder's Debenture on or after the respective due dates expressed in the
Debentures and to institute suit for the enforcement of any such payments
(Section 6.06).
The Holders of a majority in principal amount of the outstanding Debentures
of any series may on behalf of the Holders of all Debentures of such series
waive certain past defaults, except a default in payment of the principal of (or
premium, if any) or interest on any Debentures of such series or in respect of
certain provisions of the Indenture which cannot be modified or amended without
the consent of the Holder of each Debenture affected thereby (Section 9.02).
The Company will be required to furnish the Trustee annually a statement of
certain officers of the Company stating whether or not they know of any Default
or Events of Default (as defined in the Indenture) and, if they have such
knowledge, a description of the efforts to remedy the same (Section 4.05).
Consolidation, Merger, Sale or Conveyance. The Company may merge or
consolidate with, or sell or convey all or substantially all of its assets to,
any other corporation or entity, provided that (i) either the Company shall be
the continuing entity, or the successor entity (if other than the Company) shall
be a corporation organized and existing under the laws of the United States or a
state thereof or the District of Columbia (although it may, in turn, be owned by
a foreign entity) and such corporation shall expressly assume by supplemental
indenture all of the obligations of the Company under the Debentures and the
Indenture; (ii) immediately after giving effect to such transactions no Default
or Event of Default shall have occurred and be continuing, and (iii) the Company
shall have delivered to the Trustee an Officers' Certificate and opinion of
counsel, stating that the transaction and supplemental indenture comply with the
Indenture (Section 5.01).
Reorganization and Other Transactions. The Indenture does not afford the
Holders of the Debentures any protection from a decline in credit quality nor
does it give any protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction (a "Leveraged
Transaction") involving the Company that may adversely affect Holders of the
Debentures. The Indenture does not contain any provision requiring the Company
to repurchase any of the Debentures in the event of a Leveraged Transaction,
even though the Company's creditworthiness and the market value of the
Debentures may decline significantly as a result of any such transaction.
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FEDERAL INCOME TAX CONSIDERATIONS
The Company has elected to qualify as a REIT under the Code. In the opinion
of Goodwin, Procter & Hoar LLP, the Company has been organized in conformity
with the requirements for qualification as a REIT under the Code, and its manner
of operation has met and will continue to meet the requirements for
qualification and taxation as a REIT under the Code. This opinion is based on
various assumptions and is conditioned upon representations made by the Company
as to factual matters and the continuation of such factual matters. Investors
should be aware, however, that opinions of counsel are not binding upon the
Internal Revenue Service or any court. Moreover, such qualification and taxation
as a REIT in any tax year depends upon the Company's ability to meet in its
actual results for that tax year the various source of income, ownership of
assets, distribution and diversity of ownership requirements of the Code for
qualification as a REIT, which results will not be reviewed by Goodwin, Procter
& Hoar LLP. Accordingly, no assurance can be given that the actual results of
the Company for any particular tax year will in fact satisfy the requirements
for qualification. Likewise, although the Company believes that it has operated
in a manner which satisfies the REIT qualification requirements under the Code
since its organization in 1987, no assurance can be given that the Company's
qualification as a REIT will not be challenged by the Internal Revenue Service
for taxable years still subject to audit.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and very general summary of certain provisions
which currently govern the federal income tax treatment of the Company and its
shareholders. For the particular provisions which govern the federal income tax
treatment of the Company and its shareholders, reference is made to Sections 856
through 860 of the Code and the income tax regulations promulgated thereunder.
The following summary is qualified in its entirety by such reference. This
discussion does not address any state tax considerations or issues that arise as
a result of an investor's special circumstances or special status under the
Code.
Under the Code, if certain requirements are met in a taxable year,
including the requirement that the REIT distribute to the shareholders at least
95% of its real estate investment trust taxable income for the taxable year, a
REIT will generally not be subject to federal income tax with respect to income
which it distributes to its shareholders. However, the Company may be subject to
federal income tax under certain circumstances, including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preferences, and taxes imposed on income and
gain generated by certain extraordinary transactions. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could have
a material adverse effect upon the Company and its ability to make distributions
to its shareholders. For additional discussion of certain issues relating to the
Company's qualifications as a REIT, see "Risk Factors -- Consequences of Failure
to Qualify as a REIT."
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. shareholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. shareholder" means a holder of Common Stock that for
U.S. federal income tax purposes is (i) a citizen or resident of the United
States, (ii) a corporation, partnership, or other entity created or organized in
or under the laws of the United States or any political subdivision thereof, or
(iii) an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source and (iv) does not have special status under
the Code, such as tax-exempt organization; provided, however, for taxable years
beginning after December 31, 1996 (or certain earlier periods if the trust so
elects) trusts are to be included as "U.S. shareholders" only if a court within
the United States is able to exercise primary supervision over the
administration of such trust and one or more United States fiduciaries have the
authority to control all substantial decisions of the trust. Distributions that
are designated as capital gain dividends will be taxed as long-term capital
gains (to the extent they do not exceed the Company's actual net capital gain
for the taxable year) without regard to the period for which the shareholder has
held his Common Stock. However, corporate shareholders may be required to treat
up to 20% of certain capital gain dividends as ordinary income. Distributions in
excess of
25
<PAGE> 26
current and accumulated earnings and profits will not be taxable to a
shareholder to the extent that they do not exceed the adjusted basis of the
shareholder's Common Stock, but rather will reduce the adjusted basis of such
stock. To the extent that distributions in excess of current and accumulated
earnings and profits exceed the adjusted basis of shareholder's Common Stock,
the distributions will be included in income as long-term capital gain (or
short-term capital gain if the Common Stock has been held for one year or less)
assuming the Common Stock is a capital asset in the hands of the shareholder. In
addition, any dividend declared by the Company in October, November or December
of any year and payable to a stockholder of record on a specified date in any
such month shall be treated as both paid by the Company and received by the
stockholder on December 31 of such year, provided that the distribution is
actually paid by the Company during January of the following calendar year.
Investors are urged to consult their own tax advisors with respect to the
tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction. Foreign investors should consult
their own tax advisors concerning the tax consequences of an investment in the
Company including the possibility of United States income tax withholding on
Company distributions.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriting syndicates represented by one or more managing underwriters, or by
one or more underwriters without a syndicate; (ii) through agents designated
from time to time; or (iii) directly to institutional investors. The names of
any underwriters or agents of the Company involved in the sale of the Securities
for which this Prospectus is being delivered, and any applicable commission or
discounts, will be set forth in the Prospectus Supplement. The net proceeds to
the Company from such sale shall be set forth in the Prospectus Supplement.
Under agreements entered into with the Company, agents and underwriters may
be entitled to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may engage in transactions with or perform
services for the Company in the ordinary course of business.
LEGAL MATTERS
The validity of the Securities that are the subject of this Prospectus will
be passed upon for the Company by Goodwin, Procter & Hoar LLP, Boston,
Massachusetts. In the case of an underwritten public offering, certain legal
matters will be passed upon for the Underwriters by legal counsel named in the
applicable Prospectus Supplement. Each such legal counsel may rely, as to
matters of California law, upon the opinion of California counsel named in the
applicable Prospectus Supplement.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
26
<PAGE> 27
[COMPANY LOGO]
<PAGE> 28
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting commissions and discounts) anticipated to be
payable by the Company in connection with the issuance and distribution of the
Securities.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 62,500
Printing and mailing expenses.................................... 175,000
Accountant's fees and expenses................................... 125,000
Blue Sky fees and expenses....................................... 5,000
Legal fees....................................................... 800,000
Transfer Agent's fees............................................ 7,000
Miscellaneous expenses........................................... 40,500
----------
Total.................................................. $1,215,000
==========
</TABLE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
**1.0 Form of Underwriting Agreement. (Common Stock)
*1.1 Form of Underwriting Agreement (Debentures)
*1.2 Form of Placement Agency Agreement.
*1.3 Form of Escrow Agreement
*4.1 Form of Trust Indenture.
4.2 Articles of Incorporation of the Company, incorporated by reference to Registration
Statement No. 33-14571. Reference is also made to pages A-4 through A-6 of
Registration Statement No. 33-20489 for amendments adopted at the Company's Annual
Meeting of Shareholders on June 3, 1988, and to pages 9 and 10 of the Proxy
Statement dated March 31, 1989, for amendments adopted at the Company's Annual
Meeting of Shareholders on May 2, 1989.
4.3 Bylaws of the Company as amended and restated May 3, 1994, incorporated by reference
to pages A-1 through A-20 of the Company's Proxy Statement for its 1994 Annual
Meeting, filed March 30, 1994.
4.4 Share certificate for Common Stock of the Company, incorporated by reference to
Exhibit 4.0 to Registration Statement No. 33-20489.
*5.0 Opinion of Goodwin, Procter & Hoar LLP as to legality of Securities (including
consent).
**8.0 Tax Opinion of Goodwin, Procter & Hoar LLP
10.1 Burnham Pacific Properties, Inc. Stock Option Plan as Amended and Restated as of May
17, 1996, incorporated by reference to Exhibit 10.1 to Registration Statement No.
333-10559 on Form S-8.
*10.2 Revolving Loan Agreement dated November 18, 1996 between the Company, as Borrower,
and Nomura Asset Capital Corporation, as Lender.
**12.1 Computation of Ratio of Earnings to Fixed Charges.
23.0 Consent of Goodwin, Procter & Hoar LLP (Included in Exhibits 5.1 and 8.1).
**23.1 Consent of Deloitte & Touche LLP.
*24.0 Power of Attorney (included as a part of the signature page of post-effective
Amendment No. 1).
*99.0 Form T-1.
</TABLE>
- ---------------
* Previously filed
** Filed herewith
II-1
<PAGE> 29
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to Directors, officers and controlling
persons of the Company, pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a Director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registration pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant also hereby undertakes:
(1) To file, during any period in which offers and sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed with or furnished to the Commission
by the
II-2
<PAGE> 30
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this post-effective
amendment to Registration Statement No. 33-68712 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Diego, State of
California on March 24, 1997.
BURNHAM PACIFIC PROPERTIES, INC.
By: /s/ J. DAVID MARTIN
------------------------------------
Name: J. David Martin
Title: President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ --------------------------------- ---------------
<C> <S> <C>
/s/ J. DAVID MARTIN President, Chief Executive March 24, 1997
- ------------------------------------------ Officer (Principal Executive
J. David Martin Officer) and Director
/s/ DANIEL B. PLATT Chief Financial Officer March 24, 1997
- ------------------------------------------
Daniel B. Platt
JEFFREY R. FISHER* Director of Finance and Treasurer March 24, 1997
- ------------------------------------------ (Principal Accounting Officer)
Jeffrey R. Fisher
MALIN BURNHAM* Chairman of the Board of March 24, 1997
- ------------------------------------------ Directors
Malin Burnham
PHILIP L. GILDRED, JR.* Director March 24, 1997
- ------------------------------------------
Philip L. Gildred, Jr.
JAMES D. KLINGBEIL* Director March 24, 1997
- ------------------------------------------
James D. Klingbeil
DONNE P. MOEN* Director March 24, 1997
- ------------------------------------------
Donne P. Moen
THOMAS A. PAGE* Director March 24, 1997
- ------------------------------------------
Thomas A. Page
PHILIP S. SCHLEIN* Director March 24, 1997
- ------------------------------------------
Philip S. Schlein
RICHARD R. TARTRE* Director March 24, 1997
- ------------------------------------------
Richard R. Tartre
*By:/s/ J. DAVID MARTIN
- ------------------------------------------
J. David Martin
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- -------------------------------------------------------------------------- ------------
<C> <S> <C>
**1.0 Form of Underwriting Agreement. (Common Stock)
*1.1 Form of Underwriting Agreement (Debentures)
*1.2 Form of Placement Agency Agreement.
*1.3 Form of Escrow Agreement
*4.1 Form of Trust Indenture.
*4.2 Articles of Incorporation of the Company, incorporated by reference to
Registration Statement No. 33-14571. Reference is also made to pages A-4
through A-6 of Registration Statement No. 33-20489 for amendments adopted
at the Company's Annual Meeting of Shareholders on June 3, 1988, and to
pages 9 and 10 of the Proxy Statement dated March 31, 1989, for amendments
adopted at the Company's Annual Meeting of Shareholders on May 2, 1989.
*4.3 Bylaws of the Company as amended and restated May 3, 1994, incorporated by
reference to pages A-1 through A-20 of the Company's Proxy Statement for
its 1994 Annual Meeting, filed March 30, 1994.
*4.4 Share certificate for Common Stock of the Company, incorporated by
reference to Exhibit 4.0 to Registration Statement No. 33-20489.
*5.0 Opinion of Goodwin, Procter & Hoar LLP as to legality of Securities
(including consent).
**8.0 Tax Opinion of Goodwin, Procter & Hoar LLP
10.1 Burnham Pacific Properties, Inc. Stock Option Plan as Amended and Restated
as of May 17, 1996, incorporated by reference to Exhibit 10.1 to
Registration Statement No. 333-10559 on Form S-8.
*10.2 Revolving Loan Agreement dated November 18, 1996 between the Corporation,
as Borrower, and Nomura Asset Capital Corporation, as Lender.
**12.1 Computation of Ratio of Earnings to Fixed Charges.
23.0 Consent of Goodwin, Procter & Hoar LLP (Included in Exhibits 5.1 and 8.1).
**23.1 Consent of Deloitte & Touche LLP.
*24.0 Power of Attorney (included as a part of the signature page of
post-effective Amendment No. 1).
*99.0 Form T-1.
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 1.0
BURNHAM PACIFIC PROPERTIES, INC.
__________ Shares of
Common Stock
(No Par Value Per Share)
UNDERWRITING AGREEMENT
____________________, 1997
________________________
________________________
________________________
________________________
As Representatives of the several Underwriters
c/o __________________
__________________
__________________
Dear Sirs:
1. INTRODUCTORY. Burnham Pacific Properties, Inc., a corporation
organized under the laws of the State of California (the "Company"), proposes to
issue and sell, pursuant to the terms of this Agreement, to the several
Underwriters named in Schedule A hereto (the "Underwriters" which term also
shall include any underwriter substituted as hereinafter provided in Section
11), an aggregate of __________ shares of Common Stock, no par value per share
("Common Stock"), of the Company. The aggregate of __________ shares of Common
Stock so to be sold by the Company is herein called the "Firm Shares". The
Company also proposes to sell severally to the Underwriters, on a pro rata
basis, at the option of the Underwriters, an aggregate of not more than
__________ additional shares of Common Stock as provided in Section 3 of this
Agreement. The aggregate of __________ shares of Common Stock so proposed to be
sold is herein called the "Optional Shares". The Firm
<PAGE> 2
Shares and the Optional Shares are collectively referred to herein as the
"Shares". ____________________, ____________________, _____________________ and
____________________ are acting as representatives of the several Underwriters
and in such capacity are hereinafter referred to as the "Representatives".
2. (a) REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the several Underwriters, as of the date hereof, as of the First
Closing Date (as defined in Section 3), and as of the Option Closing Date (as
defined in Section 3), if any, and agrees with the several Underwriters, as
follows:
(i) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 33-68712) for
the registration under the Securities Act of 1933, as amended (the "1933
Act"), of the Shares and certain other securities and has filed such
amendments thereto, if any, as may have been required to the date hereof.
Such registration statement, as amended (if applicable) at the time such
registration became effective (including all exhibits thereto, and all
documents incorporated or deemed to be incorporated by reference therein
and the information, if any, deemed to be a part thereof pursuant to Rule
430A(b) of the rules and regulations of the Commission under the 1933 Act
(the "Rules and Regulations")), as from time to time amended or
supplemented pursuant to the 1933 Act, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), or otherwise, is hereinafter referred to as
the "Registration Statement". The Company proposes to file with the
Commission, pursuant to Rule 424(b) of the Rules and Regulations, the
Prospectus Supplement (as defined in Section 4(i) hereof) and the related
prospectus dated ___________, 1997 (the "Base Prospectus"), and has
previously advised you of all information (financial and other) with
respect to the Company set forth therein. The Base Prospectus and the
Prospectus Supplement, each in the form first provided to the Underwriters
by the Company for use in connection with the offering of the Shares (being
the forms in which they are to be filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations), including all documents
incorporated or deemed to be incorporated by reference therein, are
hereinafter referred to collectively, as the "Prospectus", except that if
any revised prospectus or prospectus supplement shall be provided to the
Underwriters by the Company for use in connection with the offering and
sale of the Shares which differs from the Prospectus first provided to the
Underwriters for such purpose (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to
Rule 424(b) of the Rules and Regulations), the term "Prospectus" shall
refer to such revised prospectus or prospectus supplement, as the case may
be, from and after the time it is first provided to the Underwriters for
such use. Unless the context otherwise requires, all references in this
Agreement to documents, financial statements and schedules and other
information which is "contained", "included", "stated", "described in" or
"referred to" in the Registration Statement or the Prospectus (and all
other references of like import) shall be deemed to mean and include all
such documents, financial statements and schedules and other information
which is or is deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be; and all references in this
Agreement to amendments or
2
<PAGE> 3
supplements to the Registration Statement or the Prospectus shall be deemed
to mean and include the filing of any document under the 1934 Act, after
the date of this Agreement which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may
be.
(ii) The Registration Statement has become effective under the 1933
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with. At the
respective times the Registration Statement and any post-effective
amendments thereto became or become effective, as the case may be, and at
the First Closing Date (and, if any Option Shares are purchased, at the
Option Closing Date), the Registration Statement complied and will comply
in all material respects with the requirements of the 1933 Act, and the
Rules and Regulations, and did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus does not and will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the foregoing
representations, warranties and agreements shall not apply to information
contained in or omitted from the Registration Statement or the Prospectus
in reliance upon, and in conformity with, written information furnished to
the Company by or on behalf of any Underwriter, directly or through the
Representatives, specifically for use in the preparation thereof.
(iii) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement and the Prospectus, when they were
filed with the Commission, comply in all material respects to the
requirements of the 1934 Act and the published rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
any further documents so filed and incorporated or deemed to be
incorporated by reference, when they are filed with the Commission, will
comply in all material respects to the requirements of the 1934 Act and the
published rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein or contemplated thereby, (A) there has been no material adverse
change in the condition (financial or otherwise) or in the earnings,
business affairs or business prospects of the Company and its subsidiaries,
its partnerships and its limited liability companies (collectively, the
Company's partnership interests in the limited partnerships (the
3
<PAGE> 4
"Limited Partnerships"), the Company's interests in the limited liability
company and the subsidiary corporations identified in Schedule D hereto are
referred to herein as the "Subsidiaries") considered as one enterprise,
whether or not arising in the ordinary course of business, or any change in
the consolidated capital stock or consolidated long-term debt of the
Company, (B) there have been no transactions entered into by the Company or
any of its Subsidiaries which are material to the Company and its
Subsidiaries considered as one enterprise, other than those entered into in
the ordinary course of its business, and (C) except for regular quarterly
dividends, there has been no dividend or distribution of any kind declared,
paid or made by the Company on its shares of capital stock. As used in this
paragraph (iv), the term "Prospectus" means the Prospectus in the form
first used to confirm sales of the Shares.
(v) The financial statements, together with the related notes and
supporting schedules (if any) in the Prospectus and elsewhere in the
Registration Statement, present fairly the financial position, results of
operations, cash flows and shareholders' equity of the Company, as at the
respective dates and for the respective periods therein indicated, and such
financial statements and related notes and supporting schedules have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved,
except as may be set forth therein or in the Prospectus. The selected
financial data and the summary financial information included in the
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The Company's ratios of
earnings to fixed charges (actual and, if any, pro forma) included in the
Prospectus and as an exhibit to the Registration Statement have been
calculated in compliance with Item 503(d) of Regulation S-K of the
Commission.
(vi) The accountants who have delivered their reports with respect
to the audited financial statements and supporting schedules included in
the Registration Statement and the Prospectus, are independent public
accountants as required by the 1933 Act and the Rules and Regulations.
(vii) The pro forma condensed financial statements, together with the
related notes and any supporting schedules, included in the Prospectus
present fairly the information shown therein, have been prepared on a basis
substantially consistent with the audited financial statements of the
Company set forth therein, the assumptions on which such pro forma
financial statements have been prepared are reasonable and are set forth in
the notes thereto, and such pro forma condensed financial statements have
been prepared, and the pro forma adjustments set forth therein have been
applied, in accordance with the applicable accounting requirements of the
1933 Act and the Rules and Regulations (including, without limitation,
Regulation S-X promulgated by the Commission), and such pro forma
adjustments have been properly applied to the historical amounts in the
compilation of such statements.
(viii) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of California;
the Company
4
<PAGE> 5
has power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and the
Prospectus; the Company's operations and business activities are not such
as to require the Company to be qualified as a foreign corporation to
transact business in any other jurisdiction where the failure to be so
qualified would have a material adverse effect on the condition (financial
or otherwise) or the earnings, business affairs or business prospects of
the Company and its Subsidiaries considered as one enterprise; and, except
for its interests in the Subsidiaries, the Company owns no material amounts
of capital stock or other beneficial interest in any other corporation,
partnership, joint venture, limited liability company or other business
entity.
(ix) Each Subsidiary has been duly organized and is validly existing
and in good standing under the laws of the jurisdiction of its
organization, has power and authority to own, lease and operate its
property and conduct its business as described in the Registration
Statement and the Prospectus, and is duly qualified to transact business
and is in good standing in each jurisdiction in which such qualification is
required, except where the failure to be so qualified or in good standing
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise; and except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary that is a corporation has been
duly authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or equity
and the Company owns its interests in the Limited Partnerships and the
limited liability company identified in Schedule D hereto free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(x) The Company is not, and upon the issuance and sale of the
Shares as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus will not be, an "investment
company" or an entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended (the "1940
Act").
(xi) The authorized, issued and outstanding shares of capital stock
of the Company are as set forth in the Prospectus under the caption
"Capitalization" (except for subsequent issuances, if any, of Common Stock
pursuant to employee benefit plans referred to in the Prospectus); the
shares of issued and outstanding Common Stock have been duly authorized and
validly issued and are fully-paid and non-assessable; the Shares have been
duly authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and non-assessable; the Common Stock and the
Company's charter and bylaws conform in all material respects to all
statements relating thereto contained in the Prospectus; the form of
certificate used to evidence the Common Stock is in due
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<PAGE> 6
and proper form and complies with all applicable statutory requirements;
and the issuance of the Shares is not subject to preemptive or other
similar rights.
(xii) Neither the Company nor any of its Subsidiaries is in violation
of its charter or by-laws or certificate of limited partnership, agreement
of limited partnership or other similar certificates or agreements, as the
case may be; neither the Company nor any of its Subsidiaries is in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which it is a party or by which it or any of its property or assets may be
bound, except for such defaults which would not, individually or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise) or the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise; and the
execution, delivery and performance of this Agreement, the consummation of
the transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Shares and the use of the proceeds
from the sale of the Shares as described in the Prospectus under the
caption "Use of Proceeds"), and compliance by the Company with its
obligations hereunder, have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of,
or default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its Subsidiaries pursuant to, any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries may be bound or to which any of the property or assets of the
Company or any of its Subsidiaries is subject, nor will such action result
in any violation of the provisions of the charter or by-laws or certificate
of limited partnership, agreement of limited partnership or other similar
certificates or agreements, as the case may be, of the Company or any of
its Subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality, governmental agency or body or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations; and no filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of
any court or governmental authority or agency is necessary or required for
the performance by the Company of its obligations hereunder in connection
with the offering, issuance or sale of the Shares or the consummation by
the Company of the transactions contemplated by this Agreement, except such
as may be required under state securities or Blue Sky laws of any
jurisdiction or real estate syndication laws in connection with the
purchase and distribution of the Shares by the Underwriters. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
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<PAGE> 7
(xiii) The Company was and is organized in conformity with the
requirements for qualification as a "real estate investment trust" under
the Internal Revenue Code of 1986, as amended (the "Code"); the Company at
all times since its organization has met and continues to meet all the
requirements of the Code for qualification as a "real estate investment
trust"; the Company is qualified as a "real estate investment trust" under
the Code and will be so qualified after consummation of the transactions
contemplated by the Prospectus; and the Company's present and contemplated
operations, assets and income will enable the Company to meet the
requirements for qualification as a "real estate investment trust" under
the Code. United States Federal income tax returns of the Company have been
examined and closed through the fiscal year of the Company ended
___________, 199__.
(xiv) Each of the Limited Partnerships listed in Schedule D to this
Agreement is a partnership for California state income tax purposes under
the applicable laws and regulations of the State of California, and Ladera
Center Associates, LLC is a limited liability company for Delaware state
income tax purposes under the applicable laws and regulations of the State
of Delaware.
(xv) There is no action, suit or proceeding before or by any court,
government, government instrumentality, governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries,
which is required to be disclosed in the Registration Statement and the
Prospectus (other than as disclosed therein) or which might result in any
material adverse change in the condition (financial or otherwise) or the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, or which might materially and
adversely affect the properties or assets of the Company or any of its
Subsidiaries; and there are no contracts or documents of the Company or any
of its Subsidiaries which are required to be filed as exhibits to the
Registration Statement or any document incorporated or deemed to be
incorporated therein by the 1933 Act, the Rules and Regulations, the 1934
Act or the rules and regulations of the Commission thereunder which have
not been so filed.
(xvi) The Company and its Subsidiaries possess such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by them; the Company and its Subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except where
the failure to so comply would not, singly or in the aggregate, result in
any material adverse change in the condition (financial or otherwise) or
the earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, or which might materially and
adversely affect a material amount of the properties or assets of the
Company and its Subsidiaries; all of the Governmental Licenses are valid
and in full force and effect, except where the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to be in
full force and effect would not have a material or adverse effect on the
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<PAGE> 8
properties or assets of the Company or any of its Subsidiaries; and neither
the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a material and
adverse effect on a material amount of the properties or assets of the
Company and its Subsidiaries.
(xvii) The Company is eligible to use a Form S-3 registration
statement under the 1933 Act. The Company is also eligible to use Form S-3
pursuant to the standards for that form in effect prior to October 21,
1992.
(xviii) Neither the Company nor any of its Subsidiaries nor any of
their respective officers or directors has taken nor will any of them take,
directly or indirectly, any action resulting in a violation of Regulation M
under the 1934 Act, or designed to cause or result in, or which has
constituted or which reasonably might be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock or
facilitation of the sale or resale of the Shares.
(xix) Neither the Company nor any of its Subsidiaries is required
to own or possess any trademarks, service marks, trade names or copyrights
in order to conduct the business now operated by it.
(xx) The Company has full right, power and authority to enter into
this Agreement; this Agreement has been duly authorized, executed and
delivered by the Company.
(xxi) The outstanding shares of Common Stock are listed on the New
York Stock Exchange and the Shares have been approved for listing, subject
to official notice of issuance, on the New York Stock Exchange.
(xxii) Except as otherwise disclosed in the Prospectus: (A) the
Company and its Subsidiaries have good and marketable title in fee simple
to all real property and improvements owned by the Company and its
Subsidiaries, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any kind
except such as (a) are described in the Prospectus or (b) do not, singly or
in the aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its Subsidiaries; (B) all of the leases and subleases
material to the business of the Company and its Subsidiaries, considered as
one enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Prospectus, are in full force and effect,
and neither the Company nor any Subsidiary has any notice of any material
claim of any sort that has been asserted by any one adverse to the right of
the Company or any Subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or
such Subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease; (C) all liens, charges,
encumbrances, claims or restrictions on or affecting the
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<PAGE> 9
real property and improvements of the Company or any of its Subsidiaries
which are required to be disclosed in the Prospectus are disclosed therein;
(D) neither the Company nor any of its Subsidiaries nor any lessee of any
portion of the real property or improvements of the Company or any of its
Subsidiaries is in default under any of the leases pursuant to which the
Company or any of its Subsidiaries leases (as lessor) its real property or
improvements and the Company knows of no event which, but for the passage
of time or the giving of notice, or both, would constitute a default under
any of such leases, except such defaults that would not, individually or in
the aggregate, have a material adverse effect on the condition (financial
or otherwise) or the earnings, business affairs or business prospects of
the Company and its Subsidiaries considered as one enterprise; (E) no
tenant under any of the leases pursuant to which the Company or any of its
Subsidiaries leases any of its real property or improvements has an option
or right of first refusal to purchase the premises demised under such
lease; (F) all of the real property and improvements of the Company and its
Subsidiaries comply with all applicable codes and zoning laws and
regulations, except for such failures to comply which would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise) or the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise; and (G) the Company has no knowledge of any pending or
threatened condemnation, zoning change or other proceeding or action that
would in any manner affect the size of, use of, improvements on,
construction on, or access to any of the real property of the Company or
any of its Subsidiaries, except such proceedings or actions that would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise) or the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise.
(xxiii) The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (A) transactions are executed in accordance with management's general
or specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain accountability for assets; (C) access to assets is permitted only
in accordance with management's general or specific authorizations; and (D)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Neither the Company nor any of its Subsidiaries nor any of
their respective employees or agents has made any payment of funds of the
Company or any of its Subsidiaries or received or retained any funds in
violation of any law, rule or regulation which payment, receipt or
retention of funds is of a character required to be disclosed in the
Prospectus.
(xxiv) Except as otherwise set forth in the Registration Statement,
(A) neither the Company nor any of its Subsidiaries has at any time, and no
other party has at any time, handled, buried, stored, retained, refined,
transported, processed, manufactured, generated, produced, spilled, allowed
to seep, leak, escape or leach, or pumped, poured, emitted, emptied,
discharged, injected, dumped, transferred or otherwise disposed of or dealt
with Hazardous Materials (hereinafter defined) on, to or from real
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<PAGE> 10
property owned, leased or otherwise utilized by the Company or any of its
Subsidiaries or in which the Company or any of its Subsidiaries has any
ownership interest, including without limitation any subsurface soils and
ground water (the "Premises"), except for such cases as (u) are not
required to be disclosed in the Registration Statement and (v) would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise) or the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, (B) no seepage, leak, escape, leach, discharge, injection,
release, emission, spill, pumping, pouring, emptying or dumping of
Hazardous Materials from or to the Premises has occurred, except for such
cases as (w) are not required to be disclosed in the Registration Statement
and (x) would not, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise) or the earnings,
business affairs or business prospects of the Company and its Subsidiaries
considered as one enterprise, (C) there are no events or circumstances that
might reasonably be expected to form the basis of, and neither the Company
nor any of its Subsidiaries has received notice of any claim, and has
knowledge of any occurrence or circumstance which with notice or passage of
time or both would give rise to an order for clean-up or remediation,
claim, action, suit or proceeding under or pursuant to any Environmental
Statute (as hereinafter defined) by any private party or governmental body
or agency, (D) there are not pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Statute (as hereinafter defined) against the
Company or any of its Subsidiaries, (E) neither the Company nor any of its
Subsidiaries is in violation of any Environmental Statute with respect to
any Hazardous Materials, (F) to the best of Company's knowledge and
information, no part of the Premises is included or proposed for inclusion
on the National Priorities List issued pursuant to CERCLA (hereinafter
defined) by the United States Environmental Protection Agency (the "EPA")
or on the inventory of other potential "problem" sites issued by the EPA
and has not otherwise been identified by the EPA as a potential CERCLA site
or included or proposed for inclusion on any list or inventory issued
pursuant to any other Environmental Statute or issued by any other
Governmental Authority (hereinafter defined), and (G) the Company and its
Subsidiaries have all permits, authorizations and approvals required under
any applicable Environmental Statutes and are each in compliance with their
requirements. As used herein "Hazardous Material" shall include without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or related
materials, asbestos or any material containing asbestos, or any other
substance or material as defined by any federal, state or local
environmental law, ordinance, rule, or regulation including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, ET SEQ.)
("CERCLA"), the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, ET SEQ.), the Resource Conservation and Recovery Act,
as amended (42 U.S.C. Sections 6901 ET SEQ.) and in the regulations adopted
and publications promulgated pursuant to each of the foregoing
(individually, an "Environmental Statute") or by any federal, state or
local governmental authority having or claiming jurisdiction over the
Premises (a "Governmental Authority").
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<PAGE> 11
(xxv) Attached hereto as Schedule D is a true and complete list of
all corporations, limited liability companies and partnerships in which the
Company holds an interest. The Company owns the general partner interest in
each of the Limited Partnerships identified in Schedule D. The Company has
no other subsidiaries other than those listed in Schedule D, and it holds
no other interests in any partnerships or limited liability companies other
than those listed in Schedule D.
(b) Any certificate signed by any officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
3. PURCHASE BY AND SALE AND DELIVERY TO, THE UNDERWRITERS; CLOSING DATE.
On the basis of the representations, warranties, covenants and agreements herein
contained, and subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriters, severally and not jointly, and the
Underwriters agree, severally and not jointly, to purchase from the Company at
the price per share set forth in Schedule B hereto, the number of Firm Shares
set forth opposite their respective names in Schedule A, subject to adjustment
in accordance with Section 11 hereof.
The Company will deliver the Firm Shares to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York time, on the business day preceding the First Closing
Date or, if no such direction is received, in the names of the respective
Underwriters), against payment of the purchase price therefor by wire transfer
of immediately available funds, at the offices of Brown & Wood LLP, One World
Trade Center, New York, New York 10048. The time and date of delivery and
closing shall be at 10:00 A.M., New York time, on the third (fourth, if the
pricing occurs after 4:30 P.M. (New York time) on any given day), business day
after the date hereof; PROVIDED, HOWEVER, that such date and time may be
accelerated or extended by agreement between the Company and the Representatives
or postponed pursuant to the provisions of Section 11 hereof. The time and date
of such payment and delivery are herein referred to as the "First Closing Date".
The Company shall make the certificates for the Firm Shares available to the
Representatives for examination on behalf of the Underwriters not later than
10:00 A.M., New York time, on the business day preceding the First Closing Date
in New York, New York.
In addition, on the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Company hereby grants the Underwriters an option to purchase,
severally and not jointly, up to an additional __________ shares of Common Stock
for the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Shares as contemplated by the Prospectus. The
purchase price per share to be paid for the Optional Shares shall be the same
price per share as for the Firm Shares, less an amount per share equal to any
dividends or distributions declared by the Company and payable on any Firm
Shares and not payable on such Optional Shares. The option granted hereby may be
exercised as to all or any part of the Optional Shares at any time not more than
30 days subsequent to the date of this
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<PAGE> 12
Agreement. No Optional Shares shall be sold and delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Optional Shares or any portion thereof may be surrendered and
terminated at any time upon notice by the Representatives to the Company.
The option granted hereby may be exercised by the Representatives on behalf
of the Underwriters by giving written notice to the Company setting forth the
number of Optional Shares to be purchased by them and the date and time for
delivery of and payment for the Optional Shares. Such date and time for delivery
of and payment for the Optional Shares (which may be the First Closing Date) is
herein called the "Option Closing Date" (the First Closing Date and the Option
Closing Date are herein called, collectively, the "Closing Dates" and,
individually, a "Closing Date") and shall not be later than seven full business
days after written notice is given. Optional Shares shall be purchased for the
account of each Underwriter in the same proportion as the number of Firm Shares
set forth opposite such Underwriter's name in Schedule A hereto bears to the
total number of Firm Shares (subject to adjustment by the Representatives to
eliminate fractional shares or odd lots). Upon exercise of the option by the
Representatives, the Company agrees to sell to the Underwriters the number of
Optional Shares set forth in the written notice of exercise and the Underwriters
agree, severally and not jointly, subject to the terms and conditions herein set
forth, to purchase such Optional Shares.
The Company will deliver the Optional Shares to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York time, on the business day preceding the Option Closing
Date or, if no such direction is received, in the names of the respective
Underwriters), against payment of the purchase price therefor by wire transfer
of immediately available funds, at the offices of Brown & Wood LLP, One World
Trade Center, New York, New York 10048. The Company shall make the certificates
for the Optional Shares available to the Representatives for examination on
behalf of the Underwriters not later than 10:00 A.M., New York time, on the
business day preceding the Option Closing Date in New York, New York.
It is understood that the Representatives, individually and not as
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment to the Company on behalf of any Underwriter or Underwriters, for
the Shares to be purchased by such Underwriter or Underwriters. Any such payment
by any of the Representatives shall not relieve such Underwriter or Underwriters
from any of its or their other obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters propose to make an initial public offering of the Shares at the
initial public offering price.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with the several Underwriters that:
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<PAGE> 13
(a) The Company will advise the Representatives promptly of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose, and will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible the lifting thereof, if issued. The
Company will advise the Representatives promptly of the receipt of any comments
from the Commission and any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for additional
information, and will not at any time file any amendment to the Registration
Statement or supplement to the Prospectus which shall not previously have been
submitted to the Representatives a reasonable time prior to the proposed filing
thereof or to which the Representatives shall reasonably object in writing or
which is not in compliance with the 1933 Act and the Rules and Regulations. The
Company will advise the Representatives promptly when the Prospectus has been
timely filed pursuant to Rule 424(b) of the Rules and Regulations. The Company
will advise the Representatives promptly when any post-effective amendment to
the Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed.
(b) The Company will prepare and file with the Commission, promptly upon
the request of the Representatives, any amendments or supplements to the
Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary to enable the several Underwriters to continue
the distribution of the Shares and, in the case of any such amendments to the
Registration Statement, will use its best efforts to cause the same to become
effective as promptly as possible. The Company will promptly file all reports
and any definitive proxy or information statements required to be filed with the
Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Shares.
(c) If at any time when a prospectus relating to the Shares is required to
be delivered under the 1933 Act any event occurs as a result of which the
Prospectus would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the 1933 Act or the Rules and
Regulations, the Company will promptly notify the Representatives thereof and
will prepare an amended or supplemented Prospectus (in form and substance
reasonably satisfactory to counsel to the Underwriters) or, with the consent of
counsel to the Underwriters, make an appropriate filing pursuant to Section 13
or 14 of the 1934 Act which will correct such statement or omission; and, in
case any Underwriter is required to deliver a prospectus relating to the Shares
nine months or more after the date of this Agreement, the Company upon the
request of the Representatives and at the expense of such Underwriters will
prepare promptly such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the 1933 Act.
(d) The Company will deliver to the Representatives, at or before the
First Closing Date, signed copies of the Registration Statement and all
amendments thereto (including all financial statements and exhibits thereto and
all documents incorporated or deemed to be incorporated by reference therein)
and signed copies of all consents and certificates of experts,
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<PAGE> 14
and will deliver to the Representatives such number of copies of the
Registration Statement, including such financial statements and all documents
incorporated or deemed to be incorporated by reference therein but without
exhibits, and of all amendments thereto, as the Representatives may reasonably
request. The copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR"), except to the extent
permitted by Regulation S-T. The Company will deliver or mail to or upon the
order of the Representatives on the date of the initial public offering, and
thereafter from time to time during the period when delivery of a prospectus
relating to the Shares is required under the 1933 Act, as many copies of the
Prospectus, in final form or as thereafter amended or supplemented, as the
Representatives may reasonably request; PROVIDED, HOWEVER, that the expense of
the preparation and delivery of any prospectus required for use nine months or
more after the date of this Agreement shall be borne by the Underwriters
required to deliver such prospectus. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(e) The Company will make generally available to its security holders as
soon as practicable, but in any event not later than 60 days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) which will be in reasonable detail
(but which need not be audited) and which will comply with Section 11(a) of the
1933 Act, covering a period of at least twelve months beginning not later than
the first day of the Company's fiscal quarter next following the "effective
date" (as defined in said Rule 158) of the Registration Statement.
(f) The Company will cooperate with the Representatives to enable the
Shares to be qualified for sale under the securities laws and real estate
syndication laws of such states and other jurisdictions as the Representatives
may reasonably designate and at the request of the Representatives will make
such applications and furnish such information as may reasonably be required of
it as the issuer of the Shares for that purpose; PROVIDED, HOWEVER, that the
Company shall not be required to qualify to do business or to file a general
consent to service of process in any such jurisdiction. The Company will, from
time to time, prepare and file such statements and reports as are or may be
required of it as the issuer of the Shares to continue such qualifications in
effect for so long a period as the Representatives may reasonably request for
the distribution of the Shares.
(g) The Company will furnish to its shareholders annual reports containing
financial statements certified by independent public accountants and with
quarterly summary financial information, in reasonable detail which may be
unaudited. During the period of five years from the date hereof, the Company
will deliver to the Representatives and, upon request, to each of the other
Underwriters, copies of each annual report of the Company and each other report
furnished by the Company to its shareholders; and will deliver to the
Representatives, as soon as they are available, copies of any other reports
(financial or other) which the Company shall publish or otherwise make available
to any of its securityholders as
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<PAGE> 15
such and, as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange.
(h) The Company will use its best efforts to effect and to maintain the
listing of the Shares on the New York Stock Exchange.
(i) Immediately following the execution of this Agreement, the Company
will prepare a prospectus supplement, dated the date hereof (the "Prospectus
Supplement"), containing the public offering price of the Shares, the
underwriting discounts and commissions, the plan of distribution of the Shares
and such other information as may be required by the 1933 Act or the Rules and
Regulations or as the Representatives and the Company deem appropriate, and will
file or transmit for filing with the Commission in accordance with Rule 424(b)
of the Rules and Regulations copies of the Prospectus (including such Prospectus
Supplement).
(j) The Company will use the net proceeds received by it from the sale of
the Shares in the manner specified in the Prospectus Supplement under "Use of
Proceeds".
(k) During a period of 90 days from the date of this Agreement, the
Company will not, without the prior written consent of ____________________, (i)
directly or indirectly, offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of any
share of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the 1933
Act with respect to any of the foregoing or (ii) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock, other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Shares to be sold hereunder, or
(B) any shares of Common Stock issued by the Company pursuant to any employee
stock option plan of the Company referred to in the Prospectus.
(l) The Company will use its best efforts to continue to meet the
requirements to qualify as a "real estate investment trust" under the Code.
(m) In accordance with the Cuba Act (if applicable) and without limitation
to the provisions of Section 6 hereof, the Company will indemnify each
Underwriter against any and all losses, claims, damages, liabilities and
expenses (including attorneys' fees) arising out of or based upon any violation
by the Company of the Cuba Act.
5. PAYMENT OF EXPENSES. The Company will pay (directly or by
reimbursement) all expenses incident to the performance of its obligations under
this Agreement, including but not limited to all expenses and taxes incident to
delivery of the Shares to the Representatives, all expenses incident to the
registration of the Shares under the 1933 Act and the printing of copies of the
Registration Statement, any preliminary prospectus (including any preliminary
prospectus supplement), the Prospectus, any amendments or supplements thereto,
all expenses
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incident to the preparation, word processing, printing and delivery of all "Blue
Sky" memoranda and this Agreement and furnishing the same to the Underwriters
and dealers except as otherwise provided in Section 4(d), the fees and
disbursements of the Company's counsel and accountants, all filing and printing
fees and expenses (including reasonable legal fees and disbursements of counsel
for the Underwriters) incurred in connection with qualification or exemption of
the Shares for sale under securities laws and real estate syndication laws of
such jurisdictions as the Representatives may designate, all fees and expenses
paid or incurred in connection with any filings made with the National
Association of Securities Dealers, Inc., the fees and expenses incurred in
connection with the listing of the Shares on the New York Stock Exchange, the
costs of preparing certificates evidencing the Shares, the costs and fees of any
registrar or transfer agent and all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section.
6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter, and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all losses, claims, damages,
liabilities or expenses (including the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in connection
therewith), joint or several, as incurred, which may be based upon the 1933 Act,
or any other statute or at common law, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the information deemed to be
part of the Registration Statement pursuant to Rule 430A(b) of the Rules and
Regulations, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus (including
any preliminary prospectus supplement) or the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, unless such statement
or omission was made in reliance upon, and in conformity with, written
information furnished to the Company by any Underwriter, directly or through the
Representatives, specifically for use in the preparation thereof; PROVIDED,
HOWEVER, that the Company shall not be liable with respect to any claims made
against any Underwriter or any such controlling person under this subsection
unless such Underwriter or controlling person shall have notified the Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim which shall have been served upon
such Underwriter or controlling person, but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
such Underwriter or controlling person otherwise than on account of the
indemnity agreement contained in this paragraph; and PROVIDED, further, that
with respect to any such untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus (including any
preliminary prospectus supplement), the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased the
Shares concerned (or to the benefit of any person controlling such Underwriter)
to the extent that any such loss, claim, damage or liability of such Underwriter
or controlling person results from the fact that a copy of the Prospectus
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<PAGE> 17
(excluding documents incorporated by reference therein) was not sent or given to
such person at or prior to the written confirmation of the sale of such Shares
to such person as required by the 1933 Act, and if the untrue statement or
omission concerned was corrected in the Prospectus (excluding documents
incorporated by reference therein). The Company will be entitled to participate
at its own expense in the defense, or, if the Company so elects, to assume the
defense, of any suit brought to enforce any such liability, but, if the Company
elects to assume the defense, such defense shall be conducted by counsel chosen
by it. In the event the Company elects to assume the defense of any such suit
and retain such counsel, the Underwriter or Underwriters or controlling person
or persons, defendant or defendants in the suit may retain additional counsel
but shall bear the fees and expenses of such counsel unless (i) the Company
shall have specifically authorized the retaining of such counsel or (ii) the
parties to such suit include such Underwriter or Underwriters or controlling
person or persons and the Company and such Underwriter or Underwriters or
controlling person or persons have been advised by counsel that one or more
legal defenses may be available to it or them which may not be available to the
Company, in which case the Company shall not be entitled to assume the defense
of such suit notwithstanding its obligation to bear the fees and expenses of
such counsel. The Company shall not be liable to indemnify any person for any
settlement of any such claim effected without the Company's written consent. In
no event shall the Company be liable under this subsection (a) for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from the Company's own counsel for all indemnified persons in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. This
indemnity agreement will be in addition to any liability which the Company might
otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of the Company's directors, each of the Company's officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all losses, claims, damages, liabilities or expenses
(including unless the Underwriter or Underwriters elect to assume the defense,
the reasonable cost of investigating and defending against any claims therefor
and counsel fees incurred in connection therewith), joint or several, as
incurred, which may be based upon the 1933 Act, or any other statute or at
common law, arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), including the information deemed to be part of the Registration
Statement pursuant to Rule 430A(b) of the Rules and Regulations, if applicable,
or the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus (including any preliminary
prospectus supplement) or the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but only insofar as
any such statement or omission was made in reliance upon, and in conformity
with, written information furnished to the Company by such Underwriter, directly
or through the Representatives, specifically for use in the preparation thereof;
PROVIDED, HOWEVER, that an Underwriter shall not be liable with respect to any
claims made against the Company or any person against whom the action is
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<PAGE> 18
brought unless the Company or such person shall have notified such Underwriter
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Company or such person, but failure to notify such Underwriter of such
claim shall not relieve it from any liability which it may have to the Company
or such person otherwise than on account of its indemnity agreement contained in
this paragraph. Such Underwriter shall be entitled to participate at its own
expense in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if such Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it. In the
event that any Underwriter elects to assume the defense of any such suit and
retain such counsel, the Company, said officers and directors and any other
Underwriter or Underwriters or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, respectively. The Underwriter against whom indemnity
may be sought shall not be liable to indemnify any person for any settlement of
any such claim effected without such Underwriter's written consent. In no event
shall the Underwriter against whom indemnity may be sought be liable under this
subsection (b) for fees and expenses of more than one counsel (in addition to
any local counsel) separate from such Underwriter's own counsel for all
indemnified persons in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. This indemnity agreement will be in addition to
any liability which such Underwriter might otherwise have.
(c) No indemnifying party shall, without the prior written consent of the
indemnified party or parties, settle or compromise or consent to the entry of
any judgment with respect to any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 6 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof), as incurred, in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party, as incurred, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other
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<PAGE> 19
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such claim. Notwithstanding the provisions of this subsection
(d), no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute are several in proportion to their respective underwriting
obligations and not joint.
7. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company, and of the several Underwriters, as set forth
in this Agreement or made by them, respectively, pursuant to this Agreement,
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or the Company or any of its officers or
directors or any controlling person, and shall survive delivery of and payment
for the Shares.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations
of the several Underwriters hereunder shall be subject to the accuracy, at and
(except as otherwise stated herein) as of the date of this Agreement, the First
Closing Date and the Option Closing Date, of the representations and warranties
made herein by the Company and of the statements of the Company's officers or
directors in any certificates furnished pursuant to the provisions hereof, to
compliance at and as of such First Closing Date or Option Closing Date (if any),
as the case may be, by the Company with its covenants and agreements herein
contained and other provisions hereof to be satisfied at or prior to such First
Closing Date or Option Closing Date, as the case may be, and to the following
additional conditions:
(a) The Registration Statement shall be effective and, at such
Closing Date (i) no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been
initiated or, to the knowledge of the
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<PAGE> 20
Company or the Representatives, threatened by the Commission, and any
request for additional information on the part of the Commission (to be
included in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the reasonable satisfaction of the
Representatives, and (ii) there shall not have come to the attention of the
Representatives any facts that would cause them to believe that the
Prospectus, at the time it was required to be delivered to a purchaser of
the Shares, contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. If the Company has elected to rely upon Rule 430A of the Rules
and Regulations, the price of the Shares and any price related information
previously omitted from the Registration Statement pursuant to Rule 430A
shall have been transmitted to the Commission for filing pursuant to Rule
424(b) of the Rules and Regulations within the prescribed time period, and
before the First Closing Date and the Company shall have provided evidence
satisfactory to the Representatives of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements
of Rule 430A of the Rules and Regulations.
(b) At the date of this Agreement, the Representatives shall have
received from Deloitte & Touche LLP a letter, dated the date of this
Agreement, in form and substance previously approved by the
Representatives, together with signed or reproduced copies of such letter
for each of the Underwriters, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectus (including,
without limitation, as to any pro forma financial statements and as to all
historical financial statements of the Company, __________ and __________).
(c) The Representatives shall have received from Deloitte & Touche
LLP a letter dated the First Closing Date to the effect that they reaffirm
the statements made in the letter furnished pursuant to Section 8(b) above,
except that the specified date referred to therein shall be a date not more
than three business days prior to the First Closing Date.
(d) The Representatives shall have received from Goodwin, Procter &
Hoar LLP, special counsel for the Company, a favorable opinion dated the
First Closing Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of California.
(ii) The Company has the corporate power and authority to own,
lease and operate its properties and conduct its business as described
in the Registration Statement and the Prospectus; and to enter into
and perform its obligations under this Agreement.
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(iii) The Company's operations and business activities, whether
by reason of the ownership or leasing of property or the conduct of
its business, are not such as to require the Company to be qualified
as a foreign corporation to transact business in any other
jurisdiction where the failure to be so qualified or in good standing
would have a material adverse effect on the condition (financial or
otherwise) or the earnings, business affairs or business prospects of
the Company and its Subsidiaries considered as one enterprise.
(iv) Each Subsidiary has been duly organized and is validly
existing and in good standing under the laws of the jurisdiction of
its organization, has power and authority to own, lease and operate
its property and to conduct its business as described in the
Registration Statement and the Prospectus, and is duly qualified to
transact business and is in good standing in each jurisdiction in
which such qualification is required, except where the failure to be
so qualified or in good standing would not have a material adverse
effect on the condition (financial or otherwise) or the earnings,
business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise; and except as otherwise
disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary that is a corporation has
been duly authorized and validly issued, is fully paid and
non-assessable and, to the best of their knowledge, is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity and the Company owns its interests in the Limited Partnerships
and the limited liability company identified in Schedule D hereto free
and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(v) The authorized, issued and outstanding shares of capital
stock of the Company are as set forth in the Prospectus under the
caption "Capitalization" (except for subsequent issuances, if any, of
Common Stock pursuant to employee benefit plans referred to in the
Prospectus or pursuant to this Agreement); and the shares of issued
and outstanding capital stock outstanding prior to the issuance of the
Shares have been duly authorized and validly issued and are fully-paid
and non-assessable and such shares of capital stock were not issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.
(vi) The Shares have been duly authorized by the Company for
issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the Company pursuant to this Agreement
against payment of the consideration set forth herein, will be validly
issued and fully-paid and non-assessable; and the issuance of the
Shares is not subject to preemptive or other similar rights arising by
operation of law, under the charter or by-laws of the Company or
otherwise.
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(vii) The Common Stock conforms to the description thereof
contained in the Prospectus in all material respects, and the form of
certificate used to evidence the Common Stock is in due and proper
form and complies in all material respects with all applicable
statutory requirements.
(viii) This Agreement has been duly authorized, executed and
delivered by the Company; and the execution, delivery and performance
of this Agreement, the consummation of the transactions herein
contemplated and in the Registration Statement (including the issuance
and sale of the Shares and the use of the proceeds from the sale of
the Shares as described in the Prospectus under the caption "Use of
Proceeds"), and compliance by the Company with its obligations
hereunder, do not and will not whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach
of, or default or Repayment Event (as defined in Section 2(a)(xiii) of
this Agreement) under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or any other agreement
or instrument, known to us, to which the Company or any Subsidiary is
a party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any Subsidiary is subject,
nor will such action result in any violation of the provisions of the
charter or bylaws or certificate of limited partnership, agreement of
limited partnership or other similar certificates or agreements, as
the case may be, of the Company or any Subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known
to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any
Subsidiary or any of their respective properties, assets or
operations.
(ix) The Registration Statement is effective under the 1933
Act and, to the best of such counsel's knowledge and information, no
stop order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act or proceedings therefor initiated
or are pending or threatened by the Commission.
(x) At the time the Registration Statement became effective
and at the date of this Agreement, the Registration Statement and the
Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus (other than the financial statements and
supporting schedules included therein, as to which no opinion need be
rendered) complied as to form in all material respects with the
requirements of the 1933 Act and the Rules and Regulations; and
nothing has come to such counsel's attention that would lead it to
believe that the Registration Statement, at the time it became
effective or at the date of this Agreement, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as of its date
22
<PAGE> 23
or at the Closing Date, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that
no statement need be made as to financial statements or supporting
schedules included in the Registration Statement or the Prospectus).
(xi) The documents incorporated or deemed to be incorporated
by reference in the Prospectus (other than the financial statements
and supporting schedules included therein, as to which no opinion need
be rendered), as of the dates they were filed with the Commission (or,
if such incorporated documents were amended, when such amendment was
filed or became effective), complied as to form in all material
respects with the requirements of the 1934 Act and the published rules
and regulations thereunder.
(xii) No filing with, consent, approval, authorization,
license, registration, qualification, decree or order of any court or
governmental authority or agency, domestic or foreign is necessary or
required in connection with the due authorization, execution and
delivery of this Agreement or for the offering, issuance, sale or
delivery of the Shares to the Underwriters, except such as has been
obtained under the 1933 Act or the Rules and Regulations or such as
may be required under state securities laws or real estate syndication
laws.
(xiii) The Company is not, and upon the issuance and sale of the
Shares as contemplated by this Agreement and the application of the
net proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the 1940 Act.
(xiv) The Company is eligible to use a Form S-3 registration
statement under the 1933 Act. The Company is also eligible to use Form
S-3 pursuant to the standards for that form in effect prior to October
21, 1992.
(xv) The Company has all legal right, power and authority
necessary to qualify as a "real estate investment trust" under the
Code; the Company currently is organized in conformity with, the
requirements for qualification as a "real estate investment trust"
under the Code; the Company has qualified as a "real estate investment
trust" for its fiscal years ending December 31, 1993, December 31,
1994 and December 31, 1995 (the years, to the best knowledge of
counsel, that are still subject to audit by the Internal Revenue
Service); the Company is organized and operates in a manner that will
enable it to qualify to be taxed as a "real estate investment trust"
under the Code for its taxable year ending December 31, 1996 and
thereafter provided the Company continues to meet the requirements of
the Code necessary for the Company to qualify as a "real estate
investment trust".
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(xvi) The information in the Prospectus under the captions
"Federal Income Tax Considerations" and "Description of Common Stock",
to the extent that it constitutes matters of law, summaries of legal
matters, the Company's charter or by-laws or legal proceedings, or
legal conclusions, is correct in all material respects; and the
opinion of such counsel under the caption "Federal Income Tax
Considerations" is confirmed.
(xvii) There is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or any
Subsidiary is a party or to which the property or assets of the
Company or any Subsidiary is subject, before or brought by any court
or any governmental agency or body, domestic or foreign, which might
reasonably be expected to result in a material adverse effect on the
condition (financial or otherwise) or the earnings, business affairs
or business prospects of the Company and its Subsidiaries considered
as one enterprise, or which might reasonably be expected to materially
and adversely affect a material amount of the properties or assets
thereof or the consummation of the transactions contemplated in this
Agreement or the performance by the Company of its obligations
hereunder.
(xviii) There are no contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be
described or referred to in the Registration Statement or in the
documents incorporated by reference therein or to be filed as exhibits
thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, the descriptions
thereof or references thereto are correct in all material respects,
and, no default exists in the due performance or observance of any
obligation, agreement, covenant or condition contained in any material
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument so described,
referred to or filed or incorporated by reference and all descriptions
in the Registration Statement of contracts and other documents to
which the Company or its Subsidiaries are a party are accurate in all
material respects.
(xix) Each of the Limited Partnerships listed in Schedule D to
this Agreement was validly formed and validly exists as a partnership
for purposes of the laws of the State of California and for purposes
of the Code, and is for both state and federal tax purposes a
partnership, and Ladera Center Associates, LLC was validly formed and
validly exists as a limited liability company for purposes of the laws
of the State of Delaware and for purposes of the Code, and is for both
state and federal tax purposes a limited liability company.
(xx) To the best of such counsel's knowledge, there are no
statutes or regulations that are required to be described in the
Prospectus that are not described as required herein.
(xxi) To the best of such counsel's knowledge, neither the
Company nor any Subsidiary is in violation of its charter or bylaws or
certificate of
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limited partnership, agreement of limited partnership or other similar
certificates or agreements.
In giving their opinion, Goodwin, Procter & Hoar LLP may rely (i) as
to the qualification of the Company and its Subsidiaries to do business in
any state or jurisdiction, upon certificates of appropriate government
officials, (ii) as to matters of fact, upon certificates and written
statements of officers of and accountants for the Company, and (iii) as to
matters arising under the laws of the State of California, upon the opinion
of Loeb & Loeb LLP delivered pursuant to Section 8(e) hereof.
(e) The Representatives have received from Loeb & Loeb LLP,
California counsel for the Company, a favorable opinion dated the First
Closing Date, in form and substance satisfactory to the Representatives, as
to the matters contained in paragraphs (i) through (viii) inclusive and
paragraph (xix) of Section 8(d) and further to the effect that:
(i) Each of the Limited Partnerships is a partnership for
California state income tax purposes under the applicable laws and
regulations of the State of California.
In giving their opinion, Loeb & Loeb LLP may rely as to matters of
fact, upon certificates and written statements of officers of and
accountants for the Company.
(f) The Representatives shall have received from Brown & Wood LLP,
counsel for the Underwriters, their favorable opinion or opinions dated the
First Closing Date with respect to the organization of the Company, the
validity of the Shares, this Agreement, the Registration Statement, the
Prospectus and such other related matters as the Representatives may
require, and the Company shall have furnished to such counsel such
documents as they may request for the purpose of enabling them to pass upon
such matters.
(g) At the First Closing Date (i) the Registration Statement and the
Prospectus shall contain all statements which are required to be stated
therein in accordance with the 1933 Act and the Rules and Regulations and
in all material respects shall conform to the requirements of the 1933 Act
and the Rules and Regulations, and neither the Registration Statement nor
the Prospectus shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading and no action, suit or
proceeding at law or in equity shall be pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries which
would be required to be set forth in the Registration Statement or the
Prospectus other than as set forth therein, (ii) there shall not have been,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus (which term, as used in this
clause (ii), means the Prospectus in the form first used to confirm sales
of the Shares), any material adverse change in the condition (financial or
otherwise) or the earnings, business affairs or business prospects of the
Company and its Subsidiaries
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<PAGE> 26
considered as one enterprise, whether or not arising in the ordinary course
of business, from that set forth in the Registration Statement and the
Prospectus, (iii) no proceeding shall be pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries
before or by any federal, state or other court, commission, board or
administrative agency wherein an unfavorable decision, ruling or finding
would materially and adversely affect the business, property, financial
condition or income of the of the Company and its Subsidiaries considered
as one enterprise other than as set forth in the Registration Statement and
the Prospectus, (iv) neither the Company nor any of its Subsidiaries shall
be in default in the performance or observance of any contract to which it
is a party, except such defaults that would not have a material adverse
effect on the condition (financial or otherwise) of the Company and its
Subsidiaries considered as one enterprise or the earnings, business affairs
or business prospects of the Company and its Subsidiaries considered as one
enterprise, (v) no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act and no
proceeding therefor shall have been instituted or threatened by the
Commission and (vi) the Representatives shall have received, at such First
Closing Date, a certificate of the President and the Chief Financial
Officer of the Company, dated as of the First Closing Date, evidencing
compliance with the appropriate provisions of this subsection (g).
(h) The Representatives shall have received a certificate, dated the
First Closing Date, of the President and the Chief Financial Officer of the
Company to the effect that the representations and warranties of the
Company contained in Section 2(a) are true and correct with the same force
and effect as though expressly made at and as of the First Closing Date.
(i) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have reasonably
requested as to the accuracy, at and as of the relevant Closing Date, of
the representations and warranties made herein by the Company, as to
compliance at and as of such Closing Date by the Company with its covenants
and agreements herein contained and other provisions hereof to be satisfied
at or prior to such Closing Date and as to other conditions to the
obligations of the Underwriters hereunder.
(j) At the date of this Agreement, the Representatives shall have
received an agreement substantially in the form of Exhibit A hereto signed
by the persons listed on Schedule C hereto.
(k) In the event the Underwriters exercise the option granted in
Section 3 hereof to purchase all or any portion of the Optional Shares, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any of its
officers or directors hereunder shall be true and correct as of the Option
Closing Date, and the Representatives shall have received:
(i) A letter from Deloitte & Touche LLP in form and substance
satisfactory to the Representatives and dated the Option Closing Date,
26
<PAGE> 27
substantially the same in scope and substance as the letter furnished
to the Representatives pursuant to Section 8(b), except that the
specified date in the letter furnished pursuant to this Section
8(k)(i) shall be a date not more than five days prior to the Option
Closing Date.
(ii) The favorable opinion of Goodwin, Procter & Hoar LLP,
counsel for the Company, in form and substance satisfactory to the
Representatives, dated the Option Closing Date, relating to the
Optional Shares and otherwise to the same effect as the opinion
required by Section 8(d).
(iii) The favorable opinion of Loeb & Loeb LLP, California
counsel for the Company, in form and substance satisfactory to the
Representatives, dated the Option Closing Date, relating to the
Optional Shares and otherwise to the same effect as the opinion
required by Section 8(e).
(iv) The favorable opinion of Brown & Wood LLP, counsel for the
Underwriters, dated the Option Closing Date, relating to the Optional
Shares and otherwise to the same effect as the opinion required by
Section 8(f).
(v) A certificate, dated the Option Closing Date, of the
President and the Chief Financial Officer of the Company confirming
that the certificate or certificates delivered at the First Closing
Date pursuant to Section 8(g) and Section 8(h) remains or remain true
as of the Option Closing Date.
(vi) Such additional certificates, dated the Option Closing
Date, as the Representatives may have reasonably requested pursuant to
section 8(i).
If any of the conditions hereinabove provided for in this Section 8 shall
not have been satisfied when and as required by this Agreement, this Agreement
may be terminated by the Representatives by notifying the Company of such
termination in writing or by telegram or telecopy at or prior to the First
Closing Date, but the Representatives shall be entitled to waive any of such
conditions.
9. TERMINATION. This Agreement may be terminated by the Representatives
by notice to the Company at or prior to the First Closing Date and the
obligations of the Underwriters to purchase Optional Shares on any Option
Closing Date which occurs after the First Closing Date may be terminated by the
Representatives by notice to the Company prior to such Option Closing Date, if,
(i) trading in the Common Stock has been suspended or materially limited by the
Commission or the New York Stock Exchange or any other governmental authority or
if trading generally on the New York or American Stock Exchanges or the Nasdaq
National Market shall have been suspended or materially limited or minimum or
maximum prices or maximum price ranges shall have been established on either
such exchange, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority or a
banking moratorium shall have been declared by New York, California or United
States authorities, (ii) there shall have been any
27
<PAGE> 28
material adverse change in the financial markets in the United States or any
outbreak or escalation of hostilities or any insurrection, armed conflict or
other calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic conditions,
in any such case the effect of which is such as to make it, in the judgment of
the Representatives, impracticable or inadvisable to offer, sell or deliver the
Shares to be purchased by the Underwriters on such Closing Date on the terms
contemplated by the Prospectus or this Agreement, (iii) there shall have been
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Prospectus, any material adverse change in
the condition (financial or otherwise) or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, which, in
the judgment of the Representatives, makes it impracticable or inadvisable to
offer, sell or deliver the Shares to be purchased by the Underwriters on such
Closing Date on the terms contemplated by the Prospectus or this Agreement or
(iv) if there shall be any litigation, pending or threatened, which, in the
judgment of the Representatives, makes it impracticable or inadvisable to offer,
sell or deliver the Shares on the terms contemplated by the Prospectus or this
Agreement. As used in this Section 9, the term "Prospectus" means the Prospectus
in the form first used to confirm sales of Shares.
10. REIMBURSEMENT OF UNDERWRITERS. Notwithstanding any other provisions
hereof, if this Agreement shall be terminated by the Representatives under
Section 8, Section 9 or Section 12, the Company will bear and pay the expenses
specified in Section 5 hereof and, in addition to its obligations pursuant to
Section 6 hereof, except when the Representatives terminate this Agreement
pursuant to clauses (i) or (ii) of Section 9, the Company will reimburse the
reasonable out-of-pocket expenses of the several Underwriters (including
reasonable fees and disbursements of counsel for the Underwriters) incurred in
connection with this Agreement and the proposed purchase and offers of the
Shares, and promptly upon demand the Company will pay such amounts to you as
Representatives. In addition, the provisions of Section 6 hereof will survive
any termination of this Agreement.
11. DEFAULT BY UNDERWRITERS. If any Underwriter or Underwriters shall
default in its or their obligations to purchase any of the Shares which it or
they are obligated to purchase under this Agreement on the First Closing Date
(including, without limitation, any Optional Shares to be purchased on the First
Closing Date), and the aggregate number of Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of
the total number of Shares which the Underwriters are obligated to purchase at
the First Closing Date, the other Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Shares
which such defaulting Underwriter or Underwriters agreed but failed to purchase.
If any Underwriter or Underwriters shall so default and the aggregate number of
Shares with respect to which such default or defaults occur is more than 10% of
the total number of Shares which the Underwriters are obligated to purchase on
the First Closing Date and arrangements satisfactory to the Representatives and
the Company for the purchase of such Shares by other persons are not made within
48 hours after such default, this Agreement shall terminate.
28
<PAGE> 29
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the Shares of a defaulting Underwriter
or Underwriters as provided in this Section 11, (i) the Company shall have the
right to postpone the First Closing Date for a period of not more than five full
business days, in order that the Company may effect whatever changes may thereby
be made necessary in the Registration Statement or the Prospectus, or in any
other documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective numbers of Firm Shares to
be purchased by the remaining Underwriters or substituted Underwriters shall be
taken as the basis of their underwriting obligation for all purposes of this
Agreement. Nothing herein contained shall relieve any defaulting Underwriter of
its liability to the Company or the Underwriters for damages occasioned by its
default hereunder. Any termination of this Agreement pursuant to this Section 11
shall be without liability on the part of any non-defaulting Underwriter or the
Company, except for expenses to be paid or reimbursed pursuant to Section 5 and
except for the provisions of Section 6.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the First
Closing Date to sell and deliver the number of Shares which it is obligated to
sell hereunder, then this Agreement shall terminate without any liability on the
part of any non-defaulting party. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
13. NOTICES. All communications hereunder shall be in writing and, if
sent to the Underwriters shall be mailed, delivered or telecopied and confirmed
to you, as their Representatives c/o ____________________ at
__________________ , _________________ , _________________ ____________,
Attention: ____________________, except that notices given to an Underwriter
pursuant to Section 6 hereof shall be sent to such Underwriter at the address
furnished by the Representatives or, if sent to the Company shall be mailed,
delivered or telecopied and confirmed at Burnham Pacific Properties, Inc., 610
West Ash Street, San Diego, California 92212, Attention: Daniel B. Platt.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control any
Underwriter or Underwriters within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, and the indemnities of the several Underwriters
shall also be for the benefit of each director of the Company, each of the
Company's officers who has signed the Registration Statement and the person or
persons, if any, who control the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act.
29
<PAGE> 30
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said state. Unless otherwise expressly stated, specified
times of day refer to New York City time.
16. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement,
the Representatives will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by the Representatives jointly as
representatives of the several Underwriters, will be binding on all the
Underwriters.
30
<PAGE> 31
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
BURNHAM PACIFIC PROPERTIES, INC.
By:
-------------------------------
Name:
Title:
Accepted and delivered, as of the date first above written:
- ------------------------
- ------------------------
- ------------------------
- ------------------------
BY:
-------------------
By:
---------------------------------------
Authorized Signature
Acting on their own behalf and as Representatives of the several
Underwriters referred to in the foregoing Agreement.
31
<PAGE> 32
SCHEDULE A
Number of
Firm Shares
to be
Purchased
-----------
. . . . . . . . . . . . . . . . . ,000
- -------------------- ---
. . . . . . . . . . . . . . . . . ,000
- -------------------- ---
. . . . . . . . . . . . . . . . . ,000
- -------------------- ---
. . . . . . . . . . . . . . . . . ,000
- -------------------- ---
--------
Total. . . . . . . . . . . . . . . . . . . . . . . . .
--------
Sch. A-1
<PAGE> 33
SCHEDULE B
1. The initial public offering price per share for the Shares shall be
$__________.
2. The purchase price per share for the Shares to be paid by the several
Underwriters shall be $__________, being an amount equal to the initial public
offering price set forth above less $__________ per share; provided that the
purchase price per share for any Optional Shares purchased upon the exercise of
the over-allotment option described in Section 3 shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Firm Shares but not payable on the Optional Shares.
Sch. B-1
<PAGE> 34
SCHEDULE C
[List of persons and entities subject to lock-up]
Sch. C-1
<PAGE> 35
SCHEDULE D
Subsidiaries of the Company
Wholly-Owned Corporate Subsidiaries of the Company:
BPP/Valley Central, Inc. (Delaware)
BPP/Riley, Inc. (California)
Partnerships in which the Company holds interests:
BPP/Richmond L.P. (California)
BPP/Marin L.P. (California)
BPP/Hilltop L.P. (California)
BPP/Pleasant Hill L.P. (California)
BPP/Van Ness L.P. (California)
BPP/East Palo Alto L.P. (California)
BPP/Valley Central L.P. (California)
BPP/Cameron Park L.P. (California)
BPP/Riley L.P. (California)
Limited Liability Company in which the Company holds an interest:
Ladera Center Associates, LLC (Delaware)
Sch. D-1
<PAGE> 36
Exhibit A
[Form of lock-up agreement]
, 1997
--------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
as Representatives of the several
Underwriters to be named in the
within-mentioned Underwriting Agreement
c/o
----------------------
----------------------
----------------------
Re: PROPOSED PUBLIC OFFERING BY BURNHAM PACIFIC PROPERTIES, INC.
Ladies and Gentlemen:
The undersigned, a stockholder and an officer and/or director of Burnham
Pacific Properties, Inc., a California corporation (the "Company"), understands
that ____________________, ____________________, ____________________ and
____________________, as representatives of the several underwriters, propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") with the
Company providing for the public offering of shares (the "Shares") of the
Company's common stock, no par value per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder and an officer and/or director of the Company, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned agrees with each underwriter to be
named in the Underwriting Agreement that, during a period of 90 days from the
date of the Underwriting Agreement, the undersigned will not, without the prior
written consent of ____________________, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic
A-1
<PAGE> 37
consequence of ownership of the Common Stock, whether any such swap or other
agreement or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise.
Very truly yours,
Signature:
------------------------
Print Name:
-----------------------
A-2
<PAGE> 1
EXHIBIT 8.0
[LETTERHEAD]
March 7, 1997
Burnham Pacific Properties, Inc.
610 West Ash Street
Suite 1600
San Diego, California 92101
Re: CERTAIN FEDERAL INCOME TAX MATTERS
Ladies and Gentlemen:
This opinion is furnished to you in our capacity as counsel to Burnham
Pacific Properties, Inc. (the "Company") in connection with the Company's Form
S-3 Registration Statement (Registration No. 33-68712) (the "Registration
Statement") filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, relating to up to $200,000,000 of the
Company's Common Stock and Convertible Debentures. This opinion relates to the
Company's qualification for federal income tax purposes as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code").
In rendering the following opinion, we have examined the Registration
Statement, the Articles of Incorporation and Bylaws of the Company, and such
other records, certificates and documents as we have deemed necessary or
appropriate for purposes of rendering the opinion set forth herein. We also
have relied upon the representations of the Company regarding the manner in
which the Company has been and will continue to be owned and operated. We have
neither independently investigated nor verified such representations, and we
assume that such representations are true, correct and complete and that all
representations made "to the best of the knowledge and belief" of any person(s)
or party(ies) or with similar qualification are and will be true, correct and
complete as if made without such qualification. We assume that the Company has
been and will be operated in accordance with applicable laws and the terms and
conditions of applicable documents. In addition, we have relied on certain
additional facts and assumptions described below.
In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the
conformity to the original documents of all documents submitted to us
<PAGE> 2
as copies, (iv) the conformity of final documents to all documents submitted to
us as drafts, (v) the authority and capacity of the individual or individuals
who executed any such documents on behalf of any person, (vi) the accuracy and
completeness of all records made available to us, and (vii) the factual
accuracy of all representations, warranties and other statements made by all
parties. We also have assumed, without investigation, that all documents,
certificates, warranties and covenants on which we have relied in rendering the
opinion set forth below and that were given or dated earlier than the date of
this letter continue to remain accurate, insofar as relevant to the opinion set
forth herein, from such earlier date through and including the date of this
letter.
The discussion and conclusions set forth below are based upon the Code,
the Income Tax Regulations and Procedure and Administration Regulations
promulgated thereunder and existing administrative and judicial interpretations
thereof, all of which are subject to change. No assurance can therefore be
given that the federal income tax consequences described below will not be
altered in the future.
Based upon and subject to the foregoing, and provided that the Company
continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution, recordkeeping and other requirements
of the Code necessary for a corporation to qualify as a REIT, we are of the
opinion that:
1. Commencing with the Company's taxable year ending December 31, 1987,
the Company has been organized in conformity with the requirements for
qualification as a "real estate investment trust" under the Code, and
the Company's method of operation, as described in the representations
referred to above, has been such as to enable it to meet, and to
continue to meet, the requirements for qualification and taxation as a
"real estate investment trust" under the Code.
2. The statements in the Registration Statement set forth under the
caption "Federal Income Tax Considerations," to the extent such
information constitutes matters of law, summaries of legal matters or
legal conclusions, have been reviewed by us and are accurate in all
material respects.
We express no opinion with respect to the transactions described in the
Registration Statement other than those expressly set forth herein. You should
recognize that our opinion is not binding on the Internal Revenue Service and
that the Internal Revenue Service may disagree with the opinion contained
herein. Although we believe that our opinion will be
<PAGE> 3
sustained if challenged, there can be no assurance that this will be the case.
The opinion expressed herein is based upon the law as it currently exists.
Consequently, future changes in the law may cause the federal income tax
treatment of the transactions described herein to be materially and adversely
different from that described above.
We consent to being named as counsel to the Company in the Registration
Statement, to the references in the Registration Statement to our firm and to
the inclusion of a copy of this opinion letter as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
-------------------------------
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
Exhibit 12.1
Burnham Pacific Properties, Inc.
<TABLE>
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<CAPTION>
Year Ended
December 31,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
EARNINGS (LOSS) BEFORE FIXED CHARGES:
Income (loss) from operations $ 2,469 $ 1,058 $ 9,846 $13,164 $(14,951) $ 9,892
Interest expense 10,308 11,208 10,483 11,582 11,960 10,744
EARNINGS (LOSS) BEFORE FIXED CHARGES $12,777 $12,266 $20,329 $24,746 $ (2,991) 20,636
FIXED CHARGES:
Interest expense 10,308 11,208 10,483 11,582 11,960 10,744
Interest capitalized 55 97 1,635
FIXED CHARGES 10,308 11,208 10,483 11,637 12,057 12,379
RATIO OF EARNINGS (LOSS) TO FIXED CHARGES 1.24 1.09 1.94 2.13 - 1.67
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 3 to Registration Statement No. 33-68712 of Burnham Pacific
Properties, Inc. on Form S-3 of our report dated February 28, 1997 appearing in
the Annual Report on Form 10-K of Burnham Pacific Properties, Inc. for the year
ended December 31, 1996 and to the reference to us under the heading "Experts"
in the Prospectus which is part of this Registration Statement.
Deloitte & Touche LLP
San Diego, California
March 24, 1997
